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BUSINESS  AND   EDUCATION 


BUSINESS  AND 
EDUCATION 

BY 

FRANK   A.  VANDERLIP 

Vice-Presidenty  National  City  Banky  Ne^w  York 


WNIVERS 

OF 


NEW   YORK 

DUFFIELD   AND    COMPANY 

1907 


atiiLliAL  Nf3 


Copyright,  1907 
By  Duffield  and  Company 


Published    May,    1907 


THE   UNIVERSITY   PRESS,   CAMBRIDGE,   U.  S.  A. 


TO 

MY    MOTHER 


164158 


CONTENTS 

PAGE 

The  Co-ordination  of  Higher  Education  i 

A  New  College  Degree 20 

The  Young  Man's  Future 42 

Trade  Schools  and  Labor  Unions    ...  56 

The  Business  Man's  Reading 82 

The  American  Invasion  of  Europe      .     .  94 

The  Industrial  Future 205 

Old- Age  Pensions  for  Workingmen    .     .  224 
America's  Foreign  Commerce     .     .     .     .  253 
The  Ultimate  Dependence  of  New  Eng- 
land UPON  Foreign  Trade 277 

Political    Problems    of    Europe   as   they 

Interest  Americans 297 

The  Currency 479 

Banking  Developments 494 

The  Lessons  of  our  War  Loan  ....  509 

The  Treasury 529 


Business  and  Education 

CO-ORDINATION   OF  HIGHER 
EDUCATION 

Founder's  day  address,  delivered  at  Girard   College, 
Philadelphia,  May  20,  1905. 

It  has  been  well  said  that  when  Stephen 
Girard  conceived  this  notable  institution,  the 
benefaction  was  more  than  a  philanthropy, 
—  it  was  a  precedent.  He  was  the  first  man 
of  great  wealth  to  devote  a  vast  fortune  to 
an  educational  idea.  We  cannot  measure 
the  influence  that  act  had.  The  example 
may  have  been  of  as  great  good  in  its  effect 
upon  the  minds  of  other  men  of  wealth,  as 
has  been  the  value  of  the  great  benefaction 
itself.  Certain  it  is  that  the  precedent  then 
made  was  the  beginning  of  a  long  and  ever- 
increasing  list  of  educational  gifts.  That 
list  has  come  to  be  of  such  proportions  that 
to-day  the  giving  of  a  million  dollars  to  an 
institution  of  learning  excites  little  more 
than  the  passing  comment  of  the  hour. 

In  the  gift  of  Stephen  Girard  there  was 
a  special  significance.  It  was  not  a  gift  of 
money  alone ;  there  was  added  to  the  money 


Business  and  Education 

wise  judgment,  a  nobler  motive,  and  a  care- 
fully considered  plan.  Girard  gave  his 
brain,  the  ripe  wisdom  of  his  experience,  and 
the  broad  and  helpful  charity  which  years 
of  struggle  and  sorrow  and  loneliness  had 
left  in  his  heart.  With  his  money  he  also 
gave  himself. 

In  the  long  line  of  educational  benefactors 
who  have  come  after  him,  can  there  be  found 
one  who  has  done  more?  Is  there  one  who 
has  more  completely  vivified  his  gift  with 
his  own  thought,  his  own  personality?  It  is 
to  the  value  of  that  particular  phase  of 
Girard's  giving,  the  value  of  the  example 
which  he  set  in  the  giving  of  his  own  ripe 
judgment,  as  well  as  of  his  money,  that  I 
would  especially  direct  your  attention. 

Learned  men  are  to-day  almost  as  far 
from  agreement  as  to  what  constitutes  the 
best  education  as  they  were  when  Aristotle 
first  protested  against  current  beliefs  on  the 
subject.  All  the  centuries  of  debate  and  of 
experiment  from  the  days  of  the  Greek  phi- 
losophers to  the  latest  meeting  of  our  own 
educators,  have  resulted  in  progress,  but 
certainly  not  in  agreement  as  to  what  is  edu- 
cation and  as  to  just  how  it  should  best  be 
acquired.  Probably  the  nature  of  the  prob- 
lem is  such  that  a  definite  solution  never  can 
be  reached.  We  can  hardly  expect  an  an- 
swer which  will  be  accepted  by  all  learned 


Higher  Education 

men.  I  am  inclined  to  believe  that  one 
reason  why  we  have  never  approached 
nearer  to  agreement,  however,  is  because 
the  solution  of  the  problem  has  been  left 
too  largely  in  the  hands  of  professional 
educators. 

Even  though  men  bear  learned  degrees 
and  have  shown  rare  ability  in  acquiring  a 
special  sort  of  knowledge  prescribed  by  a 
particular  system  of  education,  it  may  not 
follow  that  those  same  learned  men  are  the 
best  judges  of  what  should  be  the  trend  of 
that  educational  system.  If  they  alone  are 
left  to  shape  the  further  development  of  that 
system,  I  believe  its  growth  would  be  less 
likely  in  all  respects  to  follow  the  best  lines 
than  would  be  the  case  if  its  development 
were  in  a  measure  shaped  by  men  who  have 
acquired  another  form  of  education  and 
have  scored  success  in  other  fields.  The 
professional  educator  is  quite  as  likely  to 
become  narrow  and  provincial  as  is  any 
other  specialist.  The  president  of  one  of 
our  great  eastern  universities  told  me  a  few 
days  ago  that  he  had  been  making  an  exhaus- 
tive examination  of  the  history  of  his  insti- 
tution and  he  had  discovered  that  every 
great  progressive  step  which  the  university 
had  taken  in  one  hundred  and  fifty  years  had 
been  against  the  protest  and  the  opposition 
of  the  faculty.     The  trustees  from  time  to 


Business  and  Education 

time  brought  forward  new  plans  of  organi- 
zation and  broader  ideas  regarding  the  cur- 
ricuhim.  The  faculty  had  in  every  case 
voted  adversely,  and  when  the  changes  were 
made,  they  were  made  only  by  the  trustees 
taking  the  responsibility  upon  themselves. 
Even  Alexander  Hamilton,  with  his  consum- 
mate wisdom,  once  worked  out  a  plan  of 
reorganization  for  the  university,  only  to 
have  it  meet  with  the  usual  vote  of  emphatic 
protest  from  the  faculty,  but  final  adoption 
by  the  trustees.  Now,  in  the  light  of  years 
of  experience,  these  changes  are  seen  to  have 
been  wise  in  the  main.  The  unavailing  pro- 
tests of  the  learned  men  who  made  up  the 
institution's  faculty  are  discovered  to  have 
sometimes  been  b^sed  on  narrow  grounds 
lacking  the  impersonal  view  and  judgment 
that  should  have  been  brought  to  bear  upon 
the  questions. 

This  is  only  one  illustration  of  many  that 
might  be  given  of  the  tendency  toward  nar- 
rowness on  the  part  of  the  specialist,  of  the 
wisdom  there  is  in  larger  counsels,  and  of 
the  value  to  educational  progress  that  may 
come  with  the  judgment  and  experience  of 
men  of  large  affairs  and  wide  interests. 
Schools  are  for  the  education  of  all  sorts  of 
men,  and  in  directing  their  development 
there  is  need  of  almost  as  many  points  of 
view  and  of  as  varied  experiences  as  there 

4 


Higher  Education 

are  classes  of  men  to  be  educated.  It  is 
easily  possible  for  men  engaged  in  the  par- 
ticular work  of  education  to  become  narrow. 
Book  covers  contain  much  knowledge,  but 
may  also  shut  out  from  a  too  close  student 
much  wisdom,  —  much  of  that  sort  of  wis- 
dom which  is  gained  by  experience  in  the 
world.  And  so,  I  believe  that  when  the 
example  was  set  to  men  of  wealth,  of  giving 
with  their  money  their  thought,  their  ex- 
perience, their  judgment,  that  example  was 
of  great  value. 

Keen  foresight,  a  shrewd  knowledge  of 
humanity,  a  wise  and  well-seasoned  judg- 
ment of  the  practical  value  of  things,  ordi- 
narily go  to  make  up  the  mental  equipment 
of  the  man  who  has  made  a  million  dollars 
which  he  is  ready  to  devote  to  some  great 
public  good.  If  the  example  which  Girard 
set  in  any  measure  leads  such  men  fully  to 
use  that  same  wisdom  and  judgment  which 
enabled  them  to  make  the  million  dollars,  in 
helpfully  directing  along  right  lines  the 
manner  of  itV  spending,  then  the  example  is 
of  value  indeed.  The  worth  of  a  man's  ben- 
efaction may  be  vastly  increased  if,  to  direct- 
ing the  influences  which  the  gift  will  set  in 
motion,  he  will  give  anything  like  the  thought 
which  he  gave  first  to  the  acquisition  of  the 
money.  The  gift  which  is  vitalized  by  the 
sound  judgment  of  the  giver  may  become 


Business  and  Education 

more  valuable  because  of  its  aim  than  be- 
cause of  its  amount. 

There  has  been  much  generous  giving 
without  clear  thinking.  There  has  been 
much  philanthropy  the  effectiveness  of  which 
has  been  small  because  there  was  lack  of 
wisdom  in  directing  its  use.  That  leads  me 
then  to  one  thought  which  I  wish  to  present 
in  connection  with  my  subject,  and  that 
thought  is  in  reference  to  the  tendency 
toward  waste.  The  keynote  of  economic  life 
to-day  may  be  said  to  be  the  prevention  of 
waste.  The  pervading  economic  tendency 
of  the  day,  the  tendency  toward  combination 
and  away  from  useless  competition,  is  a  ten- 
dency which  has  been  set  in  motion  as  a  pro- 
test against  waste.  It  is,  I  believe,  in  its 
potentiality  for  the  improvement  of  the  con- 
dition of  men  among  the  foremost  of  all 
economic  influences  ever  brought  into  being. 

Not  a  great  deal  of  thought  has  been 
devoted  to  the  idea  of  waste  in  education. 
We  have  a  feeling  that  all  education  is  good, 
and  whether  or  not  this  or  that  particular 
educational  activity  is  of  the  greatest  possible 
efficiency,  we  still  think  that  it  is  at  least  of 
value  and  is  worthy  of  encouragement. 
This  loose  commendation  of  all  forms  of 
education  tends  to  blind  eyes  to  an  educa- 
tional waste,  though  they  would  with  clear- 
ness see  an  economic  waste.     It  is  true  too 


Higher  Education 

that  the  disadvantages  of  educational  waste 
are  not  so  clearly  discernible  as  are  the  dis- 
advantages of  economic  waste,  though  the 
results  may  be  no  less  deplorable. 

ISince  the  precedent  of  the  great  Girard 
benefaction  was  established  there  has  fol- 
lowed a  golden  flood  of  gifts  for  educational 
purposes  and  in  the  main  the  giving  has  been 
without  discrimination.  It  has  been  as  if 
Education  were  a  definite  and  complete  con- 
ception, and  as  if  a  benefaction  laid  at  Edu- 
cation's shrine,  no  matter  where  that  shrine 
might  be  erected  or  in  whose  keeping  it 
might  be,  was  a  gift  given  with  rare  discrim- 
ination and  with  the  certainty  that  it  would 
be  wisely  devoted  to  the  noblest  uses.  Unfor- 
tunately that  has  not  always  been  the  case. 
Educational  donations  are  frequently,  I  may 
almost  say  usually,  made  with  a  lack  of  per- 
spective as  to  what  would  be  best  for  the 
whole  educational  field.  The  giver  or  the 
recipient  may  be  moved  by  an  ambition  to 
satisfy  local  or  personal  pride.  Rarely  have 
men  made  their  gifts  in  such  form  as  would 
be  to  the  greatest  advantage  to  the  proper 
development  of  the  whole  system  of  higher 
education.  They  have  not  clearly  seen  how 
much  the  system  was  lacking  in  co-ordina- 
tion of  effort,  how  w^asteful  it  was  becom- 
ing in  unnecessary  duplication,  how  need- 
lessly costly  it  was  being  made  by  useless 


Business  and  Education 

and  hurtful  competition  —  not  competition 
in  the  field  of  merit,  but  in  the  field  of  narrow 
personal  or  local  ambition. 

There  has  been  a  lack  of  co-ordination  in 
the  field  of  higher  education.  We  have  failed 
to  evolve  a  strong  central  purpose  which 
would  serve  to  give  symmetry  to  educational 
development.  The  lack  of  a  central  influ- 
ence, an  influence  which  would  hold  back 
growth  here  and  encourage  it  there,  has  cost 
much  in  wasted  effort  and  in  unsymmetrical 
growth  and  development. 

If  the  Stephen  Girards  of  to-day,  men  of 
clear  thinking,  of  high  purpose,  of  wise 
judgment,  would  give  the  best  that  is  in  them 
of  wisdom  and  advice  to  aid  the  educators 
in  creating  wisely  such  a  central  purpose,  the 
gift  which  they  would  thus  make  would  be 
of  greater  value  than  would  be  their  gifts 
of  millions. 

Just  what  they  should  advise  I  am,  of 
course  neither  prepared  nor  competent  to  say. 
I  wish  only  to  assert  confidence  in  the  great 
benefit  to  the  whole  movement  of  higher 
education  which  would  come  from  the  advice 
such  men  could  give,  would  they  but  study 
the  problem  with  the  care  with  which  they 
study  the  large  affairs  of  business.  There  is, 
however,  a  hint  for  a  plan  of  effective  action, 
it  seems  to  me,  in  the  two  vast  benefactions 
which  have  been  made  by  the  great  philan- 

8 


Higher  Education 

thropist  of  our  present  day.  In  the  ten- 
million-dollar  fund  which  created  the  Car- 
negie Institution  there  was  the  idea  of  a 
benefaction  which  should  be  devoted  to  the 
advancement  of  human  knowledge  wherever 
the  opportunity  could  be  found.  It  was  not 
the  purpose  to  build  up  an  additional  insti- 
tution of  higher  learning,  to  duplicate  the 
work  and  compete  with  the  efforts  of  an 
already  ample  number  of  such  institutions, 
but  rather  to  lend  aid  wherever  aid  was  most 
needed  for  the  advancement  of  human 
knowledge.  In  a  more  recent  benefaction 
a  like  vast  sum  has  been  given  for  the  useful 
purpose  of  retiring  faculty  members  who 
have  passed  their  day  of  usefulness  and  who, 
in  the  interest  of  highest  efficiency,  had  best 
make  way  for  others.  The  benefits  of  this 
latest  foundation  are  intended  to  apply  to  the 
entire  body  of  institutions  of  higher  learning 
with  certain  obviously  appropriate  excep- 
tions. 

Is  there  not  in  these  two  benefactions  a 
hint  of  what  might  be  done  in  the  way  of  a 
movement  of  great  importance  towards  uni- 
fying and  co-ordinating  our  whole  system 
of  higher  education,  a  movement  which 
would  tend  to  decrease  a  waste  of  expendi- 
ture and  of  effort?  It  hardly  needs  demon- 
stration, I  think,  that  there  is  such  waste. 
There  is  a  waste  of  educational  endowments 


Business  and  Education 

and  of  instructors'  efforts  as  well  as  of  the 
meagre  funds  and  invaluable  time  of  the 
youths  whose  college  years  are  being  made 
less  fruitful  than  would  be  the  case  had  we 
reached  the  point  of  highest  possible  effi- 
ciency in  each  educational  institution. 

I  believe  there  might  be  created  a  great 
central  fund,  the  object  of  which  should  be 
so  to  distribute  the  income  as  to  give  effec- 
tive force  to  an  impulse  toward  co-ordination 
of  our  whole  system  of  higher  education.  If 
such  a  fund  were  in  the  hands  of  the  wisest 
body  of  men  that  could  be  brought  together 
for  that  purpose,  it  could  be  so  used  that 
it  would  stimulate  the  educational  system  to 
a  symmetrical  growth.  It  could  be  so  ad- 
ministered that  it  would  encourage  that 
growth  which  ought  to  be  encouraged  in  the 
judgment  of  men  who  were  looking  at  the 
whole  field.  It  would  avoid  the  mistake  of 
helping  institutions  to  undertake  work  that 
was  not  demanded  and  for  which  they  were 
not  fitted.  It  would  give  great  encourage- 
ment to  the  small  colleges,  but  it  would  be 
encouragement  leading  them  to  do  the  best 
possible  work  in  their  own  particular  field, 
and  not  stimulating  them  into  attempts  to 
become  universities  that  undertook  to  accom- 
plish impossible  things.  On  the  other  hand, 
it  would  give  encouragement  to  great  univer- 
sities to  broaden  and   strengthen  their  ca- 

lO 


Higher  Education 

pacity  to  do  true  university  work,  and  it 
would  discourage  the  efforts  of  such  of  those 
institutions  as  may  have  forgotten  that  num- 
bers alone  do  not  make  great  seats  of  learn- 
ing. It  would  put  emphasis  on  the  error  of 
those  institutions  that  have  lowered  their 
standards  and  admitted  to  their  privileges  a 
mass  of  illy  prepared  youths,  who,  from 
every  point  of  view,  might  have  better  spent 
some  time  at  a  smaller  institution  where  in- 
dividual needs  could  have  been  looked  after 
more  efficiently  and  effectively. 

I  would  provide  for  the  administration  of 
such  a  fund  a  board  of  trustees  that  had 
large  educational  experience  and  outlook, 
and  I  would  also  have  among  those  trustees 
men  of  broad  experience  in  affairs  of  im- 
portance and  in  the  practical  matters  which 
concern  the  average  man.  Such  a  fund  so 
administered  would  put  a  mighty  impress 
on  the  whole  development  of  higher  educa- 
tion. It  might  make  an  impress  which  would 
be  out  of  all  proportion  in  importance  to  the 
effect  which  the  same  fund  would  have  had 
if,  in  the  first  instance,  it  had  been  divided 
among  many  institutions. 

I  believe  if  some  present  day  Girard  will 
make  the  beginning  with  such  a  fund,  giving 
with  his  benefaction  his  wisdom,  his  experi- 
ence and  his  judgment,  so  that  the  fund 
really  becomes  an  instrument  such  as  I  have 
II 


Business  and  Education 

described,  he  will  have  rendered  a  service, 
the  value  of  which  will  be  beyond  measure; 
he  will  have  created  an  instrument  which  will 
check  waste ;  he  will  have  helped  men  to  see 
that  the  highest  possible  success  for  an  in- 
stitution of  learning  is  to  become  a  perfectly 
efficient  unit  in  a  perfectly  co-ordinated 
scheme;  he  will  have  made  men  understand 
that  the  unit  which  forms  one  part  in  such 
a  system  is  as  creditable  as  another,  that  the 
small  college  can  be  made  to  do  as  valuable 
work  as  the  great  university,  providing  each 
institution  fulfils  its  special  purpose  in  a 
symmetrical  whole. 

Since  the  day  when  Stephen  Girard  drew 
the  will  which  made  this  institution  possible, 
there  have  come  alterations  in  the  scope  and 
method  of  educational  work  which  have  been 
fundamental  and  far-reaching.  The  seventy- 
five  years  which  have  elapsed  since  that  in- 
strument was  written  have  worked  vast 
change  and  progress  in  every  department  of 
life,  and  in  none,  perhaps,  more  than  in  the 
field  of  education.  The  world's  conception 
of  a  university  has  been  revised  within  that 
period,  the  scope  of  the  curricula  has  been 
broadened  so  as  to  take  in  fields  of  knowl- 
edge that  were  not  thought,  by  Stephen  Gir- 
ard's  contemporaries,  susceptible  of  scien- 
tific classification.  These  curricula  have  now 
long  contained  subjects  which  then  no  one 

12 


Higher  Education 

supposed  would  ever  form  a  part  of  college 
training. 

We  have  gained,  too,  new  and  greatly 
improved  conceptions  of  how  old  subjects 
should  be  taught.  In  the  entertaining  auto- 
biography which  that  most  useful  citizen, 
Andrew  D.  White,  has  recently  given  to  the 
world,  an  interesting  picture  is  presented  of 
the  shortcomings  of  American  universities  at 
a  period  even  a  generation  after  Girard's 
death.  The  university  world  then  was  a 
world  of  dry  text-book  recitations,  lacking 
the  method  and  treatment  that  give  subjects 
a  living  interest.  There  was  not  at  that  time 
in  an  American  university  a  professor  of  his- 
tory, pure  and  simple.  It  was  not  until  Mr. 
W^hite  had  organized  Cornell  University, 
and  at  as  late  a  day  as  1870,  that  there  was 
in  any  American  university  a  course  of  lec- 
tures on  American  history.  An  American 
student,  in  order  to  secure  instruction  in  the 
history  of  his  country,  had,  before  that  time, 
to  go  to  the  lectures  of  Laboulaye  at  the 
College  of  France. 

It  is  within  the  period  since  Girard's  death 
that  an  entire  department  of  learning  has 
been  recognized  and  created  —  the  depart- 
ment of  higher  technical  education.  At  first 
the  idea  of  that  sort  of  education  was  scouted 
by  the  universities,  while  its  value  failed  of 
appreciation  at  the  hands  of  practical  men. 

13 


Business  and  Education 

A  man  need  not  have  lived  more  than  the 
allotted  span  to  remember  the  scant  regard 
in  which  higher  technical  education  was  held. 
Practical  men  pronounced  it  impractical: 
learned  men  regarded  its  atmosphere,  spirit, 
and  scope  as  something  putting  it  quite  out- 
side of  the  recognized  field  of  higher  educa- 
tion. There  has  been  a  long  step  from  the 
attitude  of  those  early  days  to  the  present 
when  we  find,  even  in  the  strongholds  of  the 
ultra-conservative  university  life  of  Ger- 
many, a  recognition  of  technical  training 
which  places  it  on  a  level  with  the  other 
learned  professions,  or  when  at  home  we  find 
even  intellectually  aristocratic  Harvard  in- 
viting, perhaps  vainly,  a  great  technical 
school  to  share  in  its  endowments  and  enjoy 
the  lustre  of  its  honored  name. 

I  have  referred  to  some  of  these  evidences 
of  change  and  of  progress  in  our  views  re- 
garding higher  education,  because  I  believe 
that  we  are  even  now  in  the  midst  of  as  im- 
portant changes  and  as  great  progress  as  in 
those  years  gone  by.  The  tendency  is  to 
make  education  more  practical.  We  are 
coming  more  clearly  to  recognize  that  for 
the  many  kinds  of  men  there  must  be  many 
kinds  of  education.  In  those  early  days  the 
engineers  who  grew  up  in  a  school  of  experi- 
ence looked  with  doubt  and  disfavor  for  a 
time  upon  the  man  who,  by  some  short  cut 


Higher  Education 

of  learning,  was  attempting  to  reach  a  goal 
ahead  of  those  who  were  following  the  or- 
dinary road.  So  the  business  man  to-day  is 
inclined  to  look  with  doubt  upon  any  sug- 
gestion that  it  is  possible  to  have  a  higher 
commercial  education  which  will  be  of  prac- 
tical value.  Just  as  the  educators  of  two 
generations  ago  felt  that  there  was  no  proper 
place  in  the  sacred  grove  of  learning  for  a 
branch  of  education  that  smacks  so  of  every- 
day life  as  did  a  course  of  engineering,  so 
to-day  there  are  many  who  believe  that  an 
attempt  to  teach  the  principles  of  commerce 
would  be  bringing  into  the  classical  concep- 
tion of  education  a  subject  that  has  no  place 
there. 

The  mental  equipment  of  a  business  man 
needs  to  be  greater  to-day  than  was  ever 
before  necessary.  Just  as  the  sphere  of  a 
business  man's  actions  has  broadened  with 
the  advent  of  rapid  transportation,  tele- 
graphs, cables,  and  telephones,  so  have  the 
needs  of  a  broad  understanding  of  sound 
principles  increased.  It  was  steam  proc- 
esses of  transportation  and  production  that 
really  made  technical  education  necessary. 
The  electric  dynamo  created  the  demand 
for  technically  educated  electrical  engineers. 
So  the  railroad,  the  fast  steamship,  the  elec- 
tric current  in  the  telephone  and  cable,  and 
the  great  economic  fact  of  gigantic  and  far- 

15 


Business  and  Education 

reaching-  business  combinations,  are  making 
the  science  of  business  a  different  thing  from 
any  conception  of  commerce  which  could 
have  been  had  when  Girard  was  the  most 
successful  of  American  business  men.  The  . 
enlarged  scope  of  business  is  demanding 
better  trained  men  —  men  who  understand 
principles.  New  forces  have  made  possible 
large  scale  production,  and  we  need  men 
who  can  comprehend  the  relation  of  that 
production  to  the  world's  markets.  There 
has  been  introduced  such  complexity  into 
modern  business,  and  such  a  high  degree  of 
specialization,  that  the  young  man  who  be- 
gins without  the  foundation  of  an  exceptional 
training  is  in  danger  of  remaining  a  mere 
clerk  or  bookkeeper.  Commercial  and  in- 
dustrial affairs  are  conducted  on  so  large  a 
scale  that  the  neophyte  has  little  chance  to 
learn  broadly  either  by  observation  or  by 
experience.  He  is  put  at  a  single  task.  The 
more  expert  he  becomes  at  it,  the  more  likely 
it  is  that  he  will  be  kept  at  it  unless  he  has 
had  a  training  in  his  youth  which  has  fitted 
him  to  comprehend  in  some  measure  the  re- 
lation of  his  task  to  those  which  others  are 
doing. 

It  is  true  that  the  practical  value  of  tech- 
nical education  is  more  obvious  than  is  the^ 
value  of  a  higher  commercial  education.     A 
man  cannot  build  a  railroad  bridge  unless 
i6 


Higher  Education 

he  is  an  engineer.  Schools  can  teach  en- 
gineering, and  the  vahie  of  the  technical 
school  is  therefore  clear.  It  is  less  easy  to 
establish  the  certain  value  of  a  higher  com- 
mercial education,  but,  for  my  own  part,  I 
believe  that  that  value  will  in  tijue^come  to 
be  as  fully  recognized.  We  have  seen  in 
Germany  an  example  of  distinct  success  of 
this  sort  of  training.  One  is  beginning  to 
find  all  over  the  world  positions  in  business 
houses  filled  by  Germans  who  have  been  se- 
lected because  of  the  superior  training  they 
have  received  in  the  German  schools. 

If  the  people  of  the  United  States  are  to 
make  the  most  of  their  opportunities,  they 
must  employ  the  most  effective  methods.  In 
a  university  cours^  of  higher  commercial 
training  much  can  be  taught  that  will  be  of 
national  value  in  the  development  of  these 
opportunities.  These  schools  of  commerce, 
it  seems  to  me,  should  be  attached  to  univer- 
sities. The  training  they  offer  should  be  in 
addition  to  the  general  university  training. 
I  believe  there  is  a  trend  in  educational  de- 
velopment to-day  that  is  in  that  direction, 
and  that  the  results  which  will  follow  such 
a  development  will  be  of  enormous  value. 

The  men  who  have  administered  Girard 
College  have  had  occasion  to  note  an  inter- 
esting change  in  an  important  phase  of  in- 
dustrial conditions.     When  Stephen  Girard 

2  17 


Business  and  Education 

planned  the  institution  there  was  well  recog- 
nized as  a  part  of  our  industrial  life  a  system 
of  industrial  apprenticeships.  That  system 
disappeared.  The  course  of  training  which 
it  offered  no  longer  exists.  Other  and,  per- 
haps, less  efficient  methods  have  come  into 
vogue. 

There  has  been  as  marked  change  in  the 
training  which  is  available  for  the  business 
man.  It  is  by  no  means  certain  that  a 
young  Stephen  Girard,  having  in  every  par- 
ticular a  mental  equipment  equal  to  that  of 
the  young  Frenchman  who  put  out  to  sea  a 
century  ago  and  more  to  make  his  fortune  in 
commerce,  could  to-day  duplicate  that  suc- 
cess. Conditions  have  vastly  changed.  A 
new  order  of  equipment  is  demanded.  The 
staunchness  of  character,  the  same  intrepid 
will,  to-day  will  play  their  part  as  they 
played  it  then,  but  in  addition  there  is  now 
demanded  a  breadth  of  technical  knowledge, 
a  fund  of  specialized  information,  a  com- 
prehension of  intricate  relations,  and  an  un- 
derstanding of  broad  principles  which  the 
conditions  of  a  century  or  even  a  generation 
ago  did  not  make  imperative.  I  have  faith 
then  that  some  new  Girard,  recognizing  those 
changed  conditions  and  consequent  new  de- 
mands, will  make  a  benefaction  which  will 
help  to  give  us  clear-thinking,  right-minded 
and  well -equipped  youths,  from  whom  may 
i8 


Higher  Education 

be  developed  future  captains  of  commerce 
and  industry.  And  if  the  example  which  this 
institution  typifies  serves  to  lead  that  bene- 
factor to  give  mith  his  money  the  best  there 
is  in  him  of  wisdom,  experience,  and  judg- 
ment, to  insure  that  the  money  be  most  wisely 
spent,  then  will  there  be  fresh  rea'son  for  us 
to  honor  the  name  of  Stephen  Girard. 


19 


A   NEW   COLLEGE   DEGREE 

An  address  delivered  at  the  Convocation  of  the  Uni- 
versity of  the  State  of  New  York  in  the  Senate 
Chamber  at  Albany  June  29,  1905. 

In  this  gathering  of  professional  educators 
I  presume  nothing  less  than  the  traditional 
bravery  of  the  fooHsh  would  lead  a  layman 
into  a  discussion  of  a  new  phase  of  higher 
education.  That  would  seem  to  be  partic- 
ularly true  in  the  face  of  a  recent  utterance 
by  that  revered  dean  of  American  learning, 
President  Eliot  of  Harvard,  when  the  sub- 
ject chosen  is  commercial  education.  Presi- 
dent Eliot  has  recently  told  us  that  it  is  mon- 
strous —  the  strong  adjective  is  his  —  that 
it  is  monstrous  that  the  common  schools 
should  give  much  time  to  compound  numbers 
and  bank  discount,  and  little  time  to  drawing. 
In  the  face  of  that  vigorous  declaration 
against  utilitarianism,  the  layman  must  be 
foolhardy  indeed  who  would  raise  his  voice 
in  advocacy  of  an  education  especially 
adapted  to  men  who  are  to  lead  commercial 
lives. 

President  Eliot  has  told  us  further  that 
the  main  object  in  every  school  should  be 
not  to  provide  students  with  means  of  earn- 
ing a  livelihood,  but  to  show  them  how  to 


A  New  College  Degree 

live  happy  and  worthy  Hves  inspired  by  ideals 
which  exalt  both  labor  and  pleasure.  That 
desirable  object  he  seems  to  believe  can  be 
best  obtained  by  teaching  children  how  lines, 
straight  and  curved,  lights  and  shades,  form 
pictures,  rather  than  by  leading  their  young 
minds  into  the  waste  places  of  compound 
numbers  and  bank  discount. 

On  any  subject  connected  with  education 
there  is  no  opinion  that  should  be  more  re- 
vered than  that  of  the  President  of  Harvard. 
His  position  is  unique;  his  words  are  the 
voice  of  authority.  This  slighting  opinion 
of  bank  discount  and  compound  numbers 
which  Dr.  Eliot  has  expressed  can,  I  pre- 
sume, hardly  be  taken  as  representing  his 
unqualified  view  regarding  practical  educa- 
tion. Through  all  time  there  have  been 
many  distinguished  utterances  by  philoso- 
phers and  teachers  as  to  the  meaning  of 
education.  These  men,  however,  have  rarely 
agreed  in  their  concepts  of  the  purpose  and 
the  aim  of  education.  Since  the  days  of 
the  Greek  philosophers  there  has  been  little 
progress  toward  a  generally  accepted  view 
of  what  education  should  aim  to  accomplish. 
When  the  doctors  of  learning  themselves 
disagree  perhaps  a  layman  may  be  forgiven 
for  differing  from  them  on  some  points. 

It  is  certain  that  the  college  curriculum 
has  undergone  many  changes  and  much  de- 

21 


Business  and  Education 

velopment  even  within  the  period  of  years 
during  which  most  of  you  have  been  actively 
connected  with  educational  matters.  We 
have  seen  great  changes,  marked  broadening 
and  much  significant  development  in  the 
studies  generally  prescribed  as  requisite  for 
a  college  course.  Those  changes  have  been 
sufficiently  marked  to  indicate  that  there  is 
still,  in  the  minds  of  those  who  are  directing 
education,  indefiniteness  as  to  what  is  ab- 
solutely best  in  the  way  of  instruction.  The 
changes  which  have  been  going  on  have  been 
sufficiently  rapid  and  recent  to  lead  one  to 
believe  that  there  may  still  be  important 
changes,  still  material  broadening,  in  the 
courses  which  our  colleges  offer.  It  is  logi- 
cal, therefore,  to  believe  that  our  system  of 
higher  education  has  not  settled  into  any- 
thing like  permanent  form.  The  alterations 
which  we  have  seen  indicate  that  there  are 
more  to  come.  Curricula  which  are  to-day 
regarded  with  the  highest  veneration,  may 
to-morrow,  in  some,  be  found  lacking  and 
in  need  of  modification.  It  is  in  the  be- 
lief that  the  college  curriculum  is  still  in  a 
period  of  transition  and  enlargement  that  I 
venture  to  give  my  views  of  one  phase  of 
higher  education  in  which  I  think  we  are 
soon  to  see  distinct  developments. 

The  experience  which  I  have  had  in  busi- 
ness, and  particularly  the  experience  which 


A  New  College  Degree 

I  have  had  with  young  college  men  in  busi- 
ness affairs,  leads  me  to  the  firm  belief  that 
much  may  properly  be  asked  in  the  way  of 
a  broadened  university  curriculum.  Much 
could  be  added  that  would  be  of  great  ad- 
vantage to  the  individuals  who  are  to  be 
future  leaders  in  business  life.  But  the 
added  courses  would  be  of  value,  not  alone  to 
those  individuals,  but  in  the  future  develop- 
ment of  commerce  along  right  lines  and  thus 
of  importance  in  working  towards  the  well- 
being  of  the  commonwealth. 

I  believe  in  the  educated  man  in  business. 
I  believe  the  present  college  course  is  not  the 
best  that  can  be  devised  for  the  training  of 
men  who  are  to  be  leaders  in  commercial  and 
financial  life.  It  is  true  that  we  have  scien- 
tifically classified  a  few  of  the  principles  and 
underlying  laws  of  commerce  and  finance, 
and  we  teach  them  more  or  less  well.  I  be- 
lieve many  more  of  those  laws  and  principles 
can  be  scientifically  classified,  and  can  be 
taught,  and  that  the  result  of  such  teaching 
will  make  better  business  men,  will  qualify 
men  for  great  responsibility  earlier  in  life, 
will  help  solve  the  problems  that  new  com- 
mercial conditions  have  raised,  and  will  work 
to  our  national  advantage,  not  only  in  the 
way  of  our  pre-eminence  in  commerce,  but 
also  in  the  direction  of  a  clearer  understand- 
ing of  the  true  relation  between  government 

23 


Business  and  Education 

and  business,  and  therefore  toward  a  better 
discharge  of  our  duties  as  citizens. 

There  should  be  no  failure  on  the  part  of 
our  educators  to  appreciate  the  increasing 
demands  that  are,  by  the  changing  character 
of  commercial  affairs,  being  laid  upon  the 
abilities  of  business  men.  The  last  two 
decades  have  witnessed  changes  that  make 
necessary  an  entirely  new  order  of  ability 
in  business  life.  Those  changes  demand  a 
greatly  superior  training.  We  have  seen 
the  capital  employed  in  business  enterprises 
jump  from  millions  to  billions.  That  change 
is  significant  of  something  much  more  than 
mere  growth  in  the  magnitude  of  commercial 
operations.  It  is  significant  of  fundamental 
alteration,  in  conditions  and  methods.  We 
have  seen  struggling  lines  of  railways  united 
into  systems  and  systems  into  vast  nets,  all 
operated  under  a  single  management.  We 
have  seen  whole  industries  concentrated  into 
a  few  combinations,  and  those  combinations 
dominating  their  especial  markets  through- 
out the  world.  These  new  conditions  have 
surrounded  us  with  problems  for  the  solu- 
tion of  which  experience  furnishes  neither 
rule  nor  precedent.  To  solve  them  we  need  a 
grounding  in  principles,  an  understanding 
of  broad  underlying  laws. 

The  world  is  in  great  measure  becoming  a 
commercial  unit.  The  eye  of  every  business 
24 


A  New  College  Degree 

man  must  be  farseeing  enough  to  observe  all 

markets  and  survey  all  zones.  A  significant 
word  spoken  in  any  market  place  or  parlia- 
ment of  the  world  instantly  reaches  the 
modern  business  man,  and  he  should  be  pre- 
pared correctly  to  interpret  its  meaning. 

Electricity  has  annihilated  the  geogra- 
phies, for  it  has  destroyed  the  distinctions^ 
which  gave  geographical  boundaries  their 
significance.  Political  distinctions  will  con- 
tinue to  live,  languages  and  religions  will 
continue  to  differ,  but  the  peoples  of  the 
earth,  regardless  of  political  boundaries,  of 
racial  differences,  of  national  ambitions,  are 
coming  rapidly  to  form  one  great  commercial 
unit,  one  great  economic  organism.  There 
are  no  tariff  walls  against  capital.  The 
language  talked  by  money  is  a  universal 
tongue.  The  modern  business  leader,  there- 
fore, more  than  was  ever  the  case  before, 
needs  a  mind  educated  to  think  clearly,  needs 
the  ability  accurately  to  trace  effect  to  cause, 
and  needs  the  training  that  will  enable  him  to 
understand  the  true  relation  between  far 
separated  conditions  and  widely  diverse  in- 
fluences. 

With  the  limitless  wealth  of  resources 
which  we  have  had  in  America,  the  success- 
ful conduct  of  a  business  enterprise  has  been 
a  comparatively  easy  matter.  Nothing  short 
of  egregious  error  has  been  likely  to  lead  to 


Business  and  Education 

failure.  Any  ordinary  mistake  in  judging 
conditions  or  in  the  application  of  principles 
has,  as  a  rule,  been  obliterated  by  the  rapidity 
of  the  country's  growth  and  the  extent  of  its 
industrial  and  commercial  development.  If 
some  of  the  men  who  have  made  notable 
commercial  successes  had  been  forced  to  face 
the  harder  conditions  that  exist  in  the  old 
world,  the  measure  of  their  success  might 
have  been  very  different.  Had  they  been 
confronted  by  a  situation  where  population 
was  pressing  upon  the  means  of  subsistence, 
where  all  the  soil  was  under  cultivation, 
where  the  mineral  resources  were  meagre 
and  where  there  was  lacking  the  wealth  of 
the  virgin  forests,  they  would  have  needed 
greater  abilities  and  better  trained  faculties 
in  order  to  achieve  such  marked  success.  We 
are  easily  inclined  to  believe  that  we  have 
the  best  business  men  in  the  world.  I  am 
disposed  to  agree  with  that  view.  But  one 
should  not  lose  sight  of  the  fact  that  the 
lavishness  of  opportunity  has  brought  com- 
mercial success  to  many  who  have  come  into 
the  field  illy  prepared  and  with  small  ability. 
Any  one  who  is  familiar  with  the  commercial 
life  of  Germany  and  has  seen  the  successes 
there  built  up  out  of  a  poverty  of  resources  — 
successes  perhaps  not  comparing  brilliantly 
with  some  of  our  own,  until  one  studies 
the  difficulties  that  had  to  be  surmounted  in 
26 


A  New  College  Degree 

achieving  them,  —  must  perceive  there  some 
elements  of  business  abiHty  superior  to  our 
own.  There  has  been  an  astonishing  increase 
of  wealth  and  an  enormous  expansion  in 
commerce  in  that  nation.  No  one  searching 
for  the  fundamental  reasons,  why  German 
commercial  progress  is  relatively  so  much 
greater  than  that  of  other  European  nations, 
will  fail  to  reach  the  conclusion  that  one  of 
the  greatest  factors  in  that  country's  devel- 
opment has  been  the  prompt  and  intelligent 
use  which  has  been  made  of  the  schools.  The 
Germans  have  to  the  highest  degree  made 
practical  application  of  their  learning.  They 
have  brought  the  true  scientific  spirit  to  bear 
upon  their  every-day  problems.  Industry 
and  commerce  have  both  profited  in  the 
largest  degree.  To-day  we  find  in  that  na-A 
tion,  in  spite  of  its  lack  of  natural  resources,  ^ 
pre-eminence  in  many  industrial  fields,  a 
striking  pre-eminence  in  foreign  commerce,, 
and  a  superior  intelligence  in  the  administra- 
tion of  finance.  Those  successes  can  all  be, 
in  the  greatest  measure,  traced  back  to  the 
schoolmaster. 

A  certain  unequalled  native  ability,  coupled 
with  unparalleled  natural  resources  have 
united  to  help  American  business  men 
achieve  a  measure  of  material  success  that 
has  been  in  many  cases,  I  believe,  quite  out 
of  proportion  to  the  ability  brought  to  the 
27 


Busmess  and  Education 

work.  In  American  business  life  the  coming 
years  can  hardly  be  expected  to  offer  so  many 
easy  roads  toward  business  success  as  have 
appeared  to  the  commercial  wayfarer  at 
every  turn  in  years  past.  Our  resources,  of 
course,  are  far  from  reaching  the  complete 
development  common  in  the  old  world 
countries.  We  have  nevertheless  advanced 
to  a  point  of  development  where  there  will 
be  less  chance  for  success  to  come  as  a  re- 
ward for  haphazard  and  illy  directed  work. 
The  successes  of  the  future  will  be  for  better 
trained  men.  That  is  true  not  alone  because 
we  have  in  a  measure  already  exploited  our 
great  resources,  but  because  the  field  of  com- 
mercial activity  has  so  vastly  broadened,  be- 
cause there  has  been  such  an  enormous  gain 
in  the  magnitude  of  commercial  operations, 
and  because  of  the  increasingly  intricate  re- 
lationships which  have  resulted  from  this 
broadening  and  this  growth.  The  changed 
scope,  character,  and  methods  of  modern 
business  have  united  to  demand  men  with  a 
training  superior  to  anything  that  was  ever 
needed  before,  as  the  successful  commercial 
leaders  of  the  future.  That  general  training 
cannot  be  had  in  the  highly  specialized  proc- 
ess of  the  routine  work  of  the  office.  The 
practical  school  of  experience  is  too  wasteful 
as  a  teacher  of  general  principles.  There 
will,  of  course,  be  the  exceptional  man  who 
28 


A  New  College  Degree 

will  come  up  through  that  routine  training 
and  dominate  his  field  by  the  force  of  his 
intellect,  but  in  the  main  the  new  conditions 
of  affairs  demand  a  superior  training  such 
as  only  the  schools  can  give. 

I  know  the  majority  of  business  men 
trained  in  the  school  of  routine  work  will 
doubt  the  feasibility  of  teaching  in  the  class- 
room, in  a  scientific  and  orderly  fashion, 
those  principles  which  they  have  gained  only 
through  years  of  hard  experience  and  which 
they  even  yet  recognize  more  by  a  sort  of 
intuition  than  by  conscious  analysis.  The 
engineers  of  an  earlier  day  thought  that  blue 
overalls  and  not  a  doctor's  gown  formed  the 
proper  dress  for  the  neophyte  in  engineering, 
but  we  have  come  long  ago  to  recognize  that 
the  road  to  success  as  an  engineer  is  through 
a  technical  school.  So,  too,  I  believe,  we 
will  in  time  come  to  recognize,  though  per- 
haps not  to  so  full  an  extent,  that  the  road 
to  commercial  leadership  will  be  through  the 
doors  of  those  colleges  and  universities 
which  have  developed  courses  especially 
adapted  to  the  requirements  of  commercial 
life. 

When  I  speak  of  a  higher  commercial  edu- 
cation I  am  referring  to  an  ideal  education 
for  commercial  and  financial  leaders.  An 
ordinary  machinist  does  not  require  to  be 
graduated  a  mechanical  engineer.  A  riveter 
29 


Business  and  Education 

of  bridge  bolts  has  no  need  to  have  taken 
honors  in  a  course  of  civil  engineering.  A 
bookkeeper,  a  stenographer,  or  a  bank  clerk 
does  not  require  such  a  commercial  educa- 
tion as  I  am  suggesting.  For  all  those  posi- 
tions there  should  be  special  instruction, 
fitted  to  the  character  of  the  duties.  My 
thought  at  the  moment,  however,  is  directed 
particularly  towards  the  ideal  form  of  uni- 
versity education  for  leaders  in  financial  and 
commercial  life. 

In  advocating  a  so-called  higher  commer- 
cial education,  I  would  not  be  regarded  as 
desiring  a  college  course  highly  specialized 
and  devoted  to  technical  subjects  at  the  ex- 
pense of  a  broad  cultural  training.  I  would 
not  be  understood  as  advocating  changes 
that  will  work  towards  a  narrower  college 
education,  but  rather  changes  that  will  work 
toward  a  broader  one.  I  am  not  going  to 
outline  specifically  what  I  think  the  curricu- 
lum should  be  for  an  ideal  higher  commercial 
education.  At  the  present  time  such  a  defi- 
nite outline  is  impossible.  It  is  impossible  be- 
cause text-books  must  be  written  and  teachers 
must  be  taught  before  that  ideal  course  can 
be  given.  An  ideal  course  such  as  I  have 
in  mind  must  at  best  be  th^  development  of 
years.  There  will  be  necessary  action  and 
reaction  between  university  life  and  business 
life.  Men  must  be  better  trained  in  the  uni- 
30 


A  New  College  Degree 

versity  for  their  business  careers,  and  then 
out  of  that  business  hfe,  and  from  among 
those  better  trained  men,  must  in  turn  come 
men  who  will  bring  to  the  universities  that 
combination  of  theory  and  practice,  that 
knowledge  of  principles  combined  with  fa- 
miliarity with  practical  detail,  which  in  the 
end  will  make  both  ideal  teachers  and  ideal 
business  men. 

There  is  little  or  nothing  that  has  been 
proven  good  that  will  need  to  be  cut  from 
the  present  college  course.  I  believe  the 
additional  work  and  training  that  will  be 
necessary  in  an  ideal  commercial  education 
can  easily  be  made  possible  within  the  pres- 
ent term  of  university  residence  by  more 
effective  and  economical  use  of  time.  It 
will  not  be  necessary  to  discard  present  re- 
quirements that  have  been  found  to  be  use- 
ful and  have  been  proven  productive  of  good 
results.  It  will  only  be  necessary  to  apply 
to  both  the  years  of  preparatory  work,  and 
to  the  years  of  the  college  course,  the  busi- 
ness man's  keen  antipathy  to  waste.  The 
time  can  then  be  saved  that  will  be  needed 
for  the  mastery  of  those  special  lines  of 
study  that  will  differentiate  this  ideal  com- 
mercial course  from  the  work  which  is  at 
present  demanded  for  a  college  degree. 

I  believe  it  is  too  nearly  the  truth  that  a 
college  degree  in  America  to-day  does  not 

31 


Business  and  Education 

mean  a  great  deal  more  than  four  years  of 
residence  at  a  college.  It  certainly  does  not 
mean  that  there  have  been  four  full  honest 
years  of  hard  and  conscientious  work  as  an 
absolute  requisite  for  that  degree.  There  is 
undoubtedly  opportunity  for  a  man  to  put  in 
the  fullest  measure  of  industry,  but  there 
are  few  institutions  where  that  full  measure 
is  absolutely  required  before  they  will  give 
the  stamp  of  their  approval  in  the  form  of  a 
degree.  The  schools  that  are  most  tenacious 
of  classical  tradition  should  hardly  feel 
proud  of  the  fact  that  practically  the  only 
institutions  of  learning  in  the  country  that 
absolutely  demand  a  full  and  honest  return 
of  work  done  in  exchange  for  the  honor  of 
their  degrees  are  the  technical  schools.  If  as 
sharp  a  demand  for  time  well  spent  were 
made  in  all  colleges,  a  long  step  would  be 
taken  toward  gaining  sufficient  room  in  the 
curriculum  for  the  studies  that  will  be  neces- 
sary to  make  up  an  ideal  commercial  course. 

I  am  perfectly  aware  that  among  the  vari- 
ous conceptions  of  the  true  aim  of  education 
there  are  many  which  agree  with  that  of  Dr. 
Eliot  that  a  school  is  not  for  the  purpose  of 
providing  the  student  with  a  means  of  earn- 
ing a  livelihood.  I  sympathize  with  those 
conceptions  which  hold  that  the  purpose  of 
education  is  to  create  noble  ideals,  to  en- 
courage the  growth  of  the  taproots  of  sound 

32 


A  New  College  Degree 

character  and  to  cultivate  the  blossoms  of 
culture,  but  do  not  believe  that  my  ideal  of 
a  commercial  education  is  necessarily  at  vari- 
ance with  these  ideals.  In  advocating  it  I 
do  not  think  it  is  necessary  to  adopt  the  view 
of  the  utilitarians,  who  believe  that  educa- 
tion should  be  merely  a  course  of  technical 
training,  fitting  the  student  for  some  prac- 
tical work.  I  would  not  make  the  mistake  of 
planning  a  course  of  study  which  would 
merely  be  an  anticipation  of  the  duties  of  the 
counting  room.  I  know  there  are  some  who 
measure  the  value  of  the  work  of  a  college 
by  its  success  in  being  of  practical  and  im- 
portant advantage  to  those  who  are  prepar- 
ing for  professional  life.  They  believe  that 
the  school  which  will,  in  the  briefest  time, 
turn  a  man  into  an  able  lawyer,  a  competent 
engineer,  or  a  skilful  physician,  should  be 
regarded  as  the  most  successful.  People 
holding  that  very  practical  conception  of  the 
purpose  of  education  should  at  least  be  glad 
to  welcome  a  new  field  in  which  university 
training  may  be  applied  with  practical  re- 
sults, but  I  do  not  believe  it  necessary  to  hold 
these  narrow  views  in  order  to  agree  that 
higher  education  may  be  so  shaped  as  to  be 
of  especial  advantage  to  young  men  looking 
forward  to  business  careers. 

There  are  some  who  regard  the  university 
as  primarily  a  centre  for  the  diffusion  of 

3  S3 


Business  and  Education 

learning.  That  conception  is  imperfect,  but 
I  should  think  that  those  who  hold  it  would 
recognize  a  field  of  the  very  greatest  impor- 
tance in  the  work  which  might  be  done  in 
the  way  of  disseminating  correct  views  in 
regard  to  financial  and  commercial  subjects. 
If  we  had  in  our  universities  professors  ca- 
pable of  a  thoroughly  scientific  understand- 
ing of  the  principles  underlying  many  of  the 
problems  of  finance  and  commerce,  these  men 
would  help  us  to  see  distinctly  and  to  think 
clearly  in  regard  to  some  of  our  every-day 
practices  and  tendencies.  The  dissemination 
of  such  knowledge  would  surely  be  of  great 
value. 

There  are  some  whose  conception  of  a 
university  is  that  its  greatest  work  should  be 
in  the  field  of  scientific  research.  They  have 
a  noble  ideal.  They  believe  that  the  devel- 
opment of  new  knowledge  is  a  work  even 
superior  to  that  of  its  diJTusjon.  They  aim 
to  inculcate  a  spirit  which  will  lead. men  to 
seek  truth  for  its  own  sake,  and  to  create  an 
enthusiasm  for  scientific  exactness.  That 
idea  is  not  at  all  out  of  harmony  with  the  pos- 
sibilities of  a  higher  commercial  education. 

In  the  popular  mind  the  motives  of  busi- 
ness men  are  often  maligned.  I  know  leaders 
in  the  business  world  who  have  as  little  con- 
cern for  personal  reward  in  what  they  seek 
to  accomplish  as  would  be  the  rule  with  men 

34 


A  New  College  Degree 

engaged  in  scientific  research.  These  men 
are  devoted  to  certain  commercial  ideals. 
The  making  of  money  happens  to  be  insep- 
arably connected  with  those  ideals,  but  the 
making  of  money  is  not  the  great  moving 
force.  They  are  interested  in  the  expansion 
and  development  of  business,  in  the  discov- 
ery of  new  fields  of  operation,  and  in  the 
introduction  of  improved  methods.  Their 
interest  in  that  work  is  no  more  ignoble  than 
is  the  interest  of  any  other  specialist.  Men 
who  already  have  more  than  most  ample 
means  are  not  for  personal  gain  pursuing 
business  with  an  absorbing  intensity.  It  is 
empire  building  with  them,  perhaps  on  a 
small  scale  or  perhaps  on  a  great  one.  Their 
lives  are  not  sordid.  They  may  be  narrow, 
as  the  lives  of  all  specialists  are  narrow,  but 
the  popular  idea  in  regard  to  men  whose  lives 
are  given  to  commerce,  the  view  that  these 
men  are  devoting  their  existence  to  mere 
money  getting,  is  in  great  measure  errone- 
ous. They  have  the  same  high  type  of  imag- 
ination which  usually  marks  men  who  attain 
eminence  in  any  other  line  of  activity.  They 
are,  in  a  large  way  or  in  a  small  way,  as  may 
be  determined  by  their  environments,  using 
qualities  similar  to  those  that  make  great 
statesmen,  great  scholars,  or  great  scientists. 
I  believe,  therefore,  that  a  proper  education 
for   the    highest   work   in    commercial    life 

35 


Business  and  Education 

might  be  so  outlined  as  to  be  entirely  in 
harmony  in  its  practical  application  with  the 
ideals  of  those  who  conceive  that  a  univer- 
sity scientific  habit  of  mind  should  be  created, 
and  where  truth  should  be  sought  purely  for 
the  love  of  the  truth. 

A  higher  conception,  perhaps,  than  all 
those  others,  is  a  definition  which  Dr.  Had- 
ley  gives  us.  In  his  view  the  most  pro- 
foundly important  work  which  falls  to  the 
lot  of  the  American  citizen  is  his  duty  in 
guiding  the  destinies  of  the  country.  He 
believes  that  if  we  train  the  members  of  the 
rising  generation  to  do  this  wd\,  all  other 
things  can  be  trusted  to  take  care  of  them- 
selves ;  but  if  we  do  not  train  them  to  do  this 
well,  no  amount  of  education  in  other  lines 
will  make  up  for  the  deficiency.  Suppose 
then  we  accept  that  as  the  final  test  of  a 
university  training.  How  can  the  duties  of 
citizenship  best  be  taught?  What  are  the 
requisites  for  a  training  in  citizenship?  I 
would  answer,  training  in  the  highest  con- 
ception of  business.  Of  what  does  the  work 
of  guiding  the  destinies  of  the  country  con- 
sist? Consider  what  are  the  political  prob- 
lems of  the  day  and  of  the  generation.  A 
great  part,  nearly  the  whole  of  the  work  of 
government  in  a  country  like  ours,  is  merely 
the  conduct  of  business  on  a  very  large  scale. 
Look  over  the  political  platforms  of  the  last 

3^ 


A  New  College  Degree 

generation,  or  study  the  messages  of  the 
presidents,  and  you  will  find  a  very  large  per- 
centage of  the  political  questions  that  have 
been  raised  are,  in  their  ultimate  definition, 
merely  commercial  questions.  What  have 
they  been?  The  money  standard;  the  con- 
trol of  trusts;  the  regulation  of  interstate 
commerce;  railroad  rebates;  questions  af- 
fecting the  currency  and  banking;  customs 
duties ;  schemes  of  taxation ;  the  building  of 
canals  and  the  creation  of  plans  for  irriga- 
tion. These  and  questions  like  them  have 
made  up  almost  altogether  the  political  ques- 
tions of  the  day.  They  are  in  the  end  merely 
business  questions.  No  purely  ethical  prin- 
ciple is  at  stake.  We  have  now  no  necessity 
for  a  discussion  of  the  rights  of  man.  Our 
government  in  the  main  is  a  great  business 
enterprise  and  our  political  problems  in  the 
main  are  economic  problems. 

In  respect  to  such  questions,  what  sort  of 
training  is  wanted  ?  Can  any  one  answer 
them  so  well  as  a  thoroughly  trained  busi- 
ness man,  granting  first  that  he  is  governed 
by  the  highest  ideals  of  patriotism  and  hon- 
esty? Will  not  the  man  who  is  thoroughly 
well  grounded  in  the  principles  of  commerce 
and  finance  be  better  qualified  to  guide  the 
destinies  of  our  country  than  one  who  has 
merely  had  a  training  in  the  love  for  the 
beautiful  or  one  who  has  won  class  prizes  in 

37 


Business  and  Education 

Greek  declamation?  If  we  adopt  President 
Hadley's  view  as  to  the  most  profoundly 
important  work  of  the  university,  I  believe 
that  noble  ideal  is  most  distinctly  in  harmony 
with  the  conception  I  have  of  what  is  possible 
in  the  way  of  a  higher  commercial  education. 
In  this  connection  Dr.  Hadley  has  made 
one  of  the  wisest  statements  that  has  come 
from  any  modern  educator.  He  has  told  us 
that  every  change  in  industry  and  political 
methods  makes  it  clearer  that  mere  intelli- 
gence is  not  s>ifficient  to  secure  wise  admin- 
istration of  the  afifairs  of  the  country,  but  in 
addition  there  must  also  be  developed  a 
sense  of  trusteeship.  There  is  nothing  so 
much  needed  in  American  life  to-day,  in  my 
opinion,  as  a  cultivation  of  a  sense  of  trustee- 
ship. That  need  is  by  no  means  confined  to 
political  life  but  is  the  need  standing  above 
all  others  in  commercial  life.  If  the  schools 
can  teach  it,  and  in  a  measure  I  believe  they 
can,  they  will  do  more  for  commerce  than 
they  have  done  for  engineering,  or  law,  or 
science.  If  I  were  to  name  one  thing  pre- 
eminently to  be  desired  as  a  result  of  a  course 
of  higher  commercial  education,  it  would  be 
the  cultivation  of  a  proper  sense  of  trustee- 
ship. I  do  not  regard  that  as  an  impossible 
ideal.  A  truer  understanding  of  the  real 
relation  and  relative  importance  of  the  prin- 
ciples of  commerce  would  give  men  a  far 

38 


A  New  College  Degree 

clearer  view  and  juster  appreciation  of  the 
responsibilities  of  trusteeship.  We  have 
men  holding  positions  of  great  trust  in  our 
commercial  life  to-day  who  have  a  childish 
ignorance  in  regard  to  their  responsibilities 
as  trustees.  These  men  are  honest  men, 
they  are  well-meaning  men,  but  they  have 
never  learned  the  elemental  principles  upon 
which  a  sense  of  trusteeship  must  be  built. 
I  am  not  so  optimistic  as  to  believe  that  a 
college  course  could  be  so  designed  that  those 
having  its  benefits  would  afterward  in  active 
life  always  be  imbued  with  the  highest  sense 
of  trusteeship,  but  I  do  believe  that  Dr. 
Hadley  uttered  a  great  truth  when  he 
pointed  out  that  the  cultivation  of  such  a 
sense  is  the  most  important  work  that  a  col- 
lege has  to  do.  If  it  is  important  in  the 
education  of  the  American  citizen,  it  is  doubly 
important  in  the  education  of  that  class  of 
American  citizens  who  have  to  deal  with 
the  commercial  and  financial  life  of  the 
country. 

We  are  having  an  illustration  to-day  of 
how  a  clearer  understanding  of  underlying 
principles  of  commerce  illuminates  ethical 
considerations.  A  generation  ago,  before 
we  had  thought  very  deeply  or  accurately  in 
regard  to  the  nature  of  common  carriers, 
there  were  many  men  who  saw  nothing  ethi- 
cally wrong  in  a  railroad  rebate.     Men  re- 

39 


Business  and  Education 

garded  a  railroad  as  a  piece  of  private  prop- 
erty and  railroad  transportation  as  a  com- 
modity which  might  with  perfect  propriety 
be  bargained  for  and  sold  to  the  best  advan- 
tage. The  whole  community  has  since  been 
educated  to  a  clearer  comprehension  of  the 
fundamental  principles  of  transportation, 
with  the  result  that  we  have  built  up  ethical 
standards  which  absolutely  did  not  exist  be- 
fore. This  I  believe  is  an  illustration  of  what 
might  happen  in  many  other  directions  with 
a  better  education  embracing  principles  and 
underlying  laws. 

I  want  to  quote  again  from  the  President 
of  Yale.  Dr.  Hadley  says :  "  An  intelligent 
study  of  science  whether  it  be  physics  or 
biology,  psychology  or  history,  should  train 
a  man  in  that  respect  for  law  which  is  the 
best  antidote  to  capricious  selfwill  on  the 
part  of  the  individual.  The  student  learns 
that  he  is  in  the  midst  of  an  ordered  world. 
If  he  has  the  root  of  the  matter  in  him,  he 
thereby  gains  increasing  respect  for  that 
order  and  readiness  to  become  himself  a 
part  of  it." 

That  statement  we  must  all  recognize  as 
eminently  true.  Is  it  not  equally  true  of  the 
study  of  the  science  of  commerce  ?  Will  not 
such  a  study  train  men  in  that  respect  for 
law  which  is  the  best  antidote  to  capricious 
selfwill  on  the  part  of  the  individual  ?  Is  it 
40 


OF 

^S^kl^S^^^New  College  Degree 

not  that  of  which  the  country  is  to-day- 
standing  in  the  greatest  need  ?  What  do  we 
need  more  than  an  antidote  to  capricious  self- 
will  on  the  part  of  the  accidental  millionaire  ? 
Does  not  a  lack  of  knowledge  of  fundamental 
principles  lead  to  a  lack  of  respect  for  the 
great  fundamental  laws  of  finance?  I  be- 
lieve that  is  true.  I  believe  when  we  have 
reached  a  point  of  really  making  a  scien- 
tific classification  of  the  principles  of  fi- 
nance and  commerce,  a  classification  which 
without  question  can  be  made,  and  when 
we  have  developed  a  class  of  teachers  ca- 
pable of  giving  adequate  instruction,  and 
so  made  possible  a  course  of  study  truly 
worthy  of  serving  as  the  basis  for  a  new 
college  degree,  we  will  then  have  taken  a 
long  step  in  the  direction  of  creating  that 
respect  for  law  of  which  we  are  now  in  need. 
There  will  be  a  respect  for  economic  laws 
because  we  will  better  understand  their  sig- 
nificance and  force.  There  will  be  a  greater 
respect  for  legislative  laws  because,  with 
wiser  legislators,  those  laws  will  more  surely 
be  based  on  correct  economic  principles.  If 
all  this  is  true,  then  whatever  your  ideals  of 
education  may  be,  cannot  you  all  unite  in 
helping  to  evolve  a  college  course  which  will 
be  worthy  of  upholding  a  degree  of  Master 
of  Commerce? 


41 


THE   YOUNG   MAN'S    FUTURE 

An  address,  delivered  before  the  American  Institute 
of  Bank  Clerks,  St.  Paul,  1905. 

Bankers  are  more  or  less  given  to  predic- 
tion, to  the  making  of  forecasts  and  proph- 
ecies. They  must  form  opinions  in  regard 
to  the  future.  It  is  a  part  of  their  business 
to  have  definite  ideas  as  to  whether  money 
is  to  be  easy  or  close,  whether  business  will 
be  active  or  dull,  whether  collections  will  be 
good  or  otherwise. 

Financial  prophecy,  however,  is  full  of 
difficulties.  There  are  many  currents  and 
cross-currents  to  be  reckoned  with.  The 
whole  field  of  action  is  so  much  larger  than 
any  man's  vision  that  inadvertently  he  may 
leave  out  of  consideration  matters  of  vital 
importance.  The  course  of  affairs  may  be 
completely  altered  by  psychological  condi- 
tions which  cannot  be  weighed  in  the  most 
carefully  prepared  tables  of  statistics.  At 
best  the  keenest  and  wisest  observers  must 
write  "E.  &  O.  E."  in  large  letters  after 
their  attempts  to  divine  the  financial  future. 
These  distinguished  bank  officers  who  have 
dined  with  you  this  evening  are  undoubtedly 
skilled  in  such  a  correct  grouping  of  facts 
42 


The  Young  Man's  Future 

as  enables  them  to  draw  accurate  conclusions 
in  regard  to  the  financial  future. 

There  is  another  line  of  prophecy,  how- 
ever, which  is,  I  believe,  quite  as  interesting, 
and  far  easier.  If  I  were  forced  to  turn  seer 
and  to  undertake  to  forecast  future  events, 
and  could  I  have  my  choice  of  fields,  I  would 
keep  quite  clear  of  any  attempt  at  forecast- 
ing future  financial  afifairs,  and  would  adopt 
the  easier  course  of  attempting  to  predict  the 
measure  of  success  or  of  failure  that  is  likely, 
with  added  years,  to  come  to  a  young  man. 
Men  ought  to  be  as  interesting  as  markets. 
I  am  certain  that  a  prediction  can  be  made 
regarding  the  future  of  a  young  man,  if  we 
have  at  hand  the  necessary  data,  with  as 
much  accuracy  as  we  can  predict  the  future 
of  the  market.  There  are  many  bank  ofH- 
cers  here  who  could,  I  have  no  doubt,  pre- 
dict, with  correctness,  the  future  course  of 
money  rates,  of  bank  reserves  or  of  gold 
imports,  but  with  still  greater  chances  of 
accuracy,  I  believe,  they  could  predict  the 
future  careers  of  some  of  the  members  of 
this  chapter  of  the  American  Institute  of 
Bank  Clerks. 

I  believe  it  is  possible  to  formulate  certain 
rules  and  principles  which,  applied  to  the 
data  in  regard  to  a  young  man's  capacity, 
character,  and  tendencies,  will  enable  one  to 
make  an  accurate  estimate  of  his  chances  of 

43 


Business  and  Educatior^ 

success  or  his  dangers  of  failure.  If  it  is 
possible  to  lay  down  such  rules,  then  some 
knowledge  of  those  rules  ought  to  be  of 
value  to  young  men.  That  is  so  because  it 
is  within  the  power  of  each  young  man  to 
change  in  a  large  measure  the  character  of 
the  data  in  his  case.  Young  men  are  not 
foreordained  to  failure  or  success.  Their 
future  is,  in  the  main,  of  their  own  making. 
If  they  comprehend  that  certain  characteris- 
tics or  tendencies  which  they  are  forming 
will  have  an  enormous  influence  upon  their 
future,  if  they  clearly  see  that  their  career 
is  in  but  small  measure  a  matter  of  chance, 
and  is  in  large  measure  the  result  of  those 
early  formed  habits,  characteristics,  and  ten- 
dencies, they  will  be  less  likely  to  feel  that 
they  must  wait  for  some  brilliant  oppor- 
tunity to  prove  themselves;  they  will  be 
more  likely  to  understand  that  success  must 
be  won  by  sincere  effort  applied  to  each  day's 
work. 

Without  doubt  there  is  among  the  young 
men  who  are  members  of  this  chapter  of  the 
American  Institute  of  Bank  Clerks  the  fu- 
ture president  of  a  great  bank.  I  believe  I 
can  pick  out  the  man.  I  shall  not  name  him ; 
you  can  do  that  better  than  I ;  but  I  am  going 
to  tell  you  exactly  who  he  is.  This  young  man 
has,  of  course,  certain  fundamental  qualities 
which  are  and  must  be  common  to  every  suc- 

44 


The  Young  Man*s  Future 

cessful  man.  He  started  out  with  good  phy- 
sique, and  he  has  not  abused  that  heritage,  for 
no  man  can  be  permanently  successful  without 
having  an  extraordinary  capacity  for  work, 
—  and  health  and  working  capacity  are  one. 
He  has  been  naturally  endowed  with  a  per- 
sonality which  will  permit  him  to  work  co- 
operatively with  his  fellows,  a  personality 
which  will  permit  him  to  win  their  regard, 
as  well  as  lead  him  to  recognize  merit  in 
others.  Then,  as  a  matter  of  course,  he  has 
at  least  a  fair  education;  he  is  diligent, 
capable,  and  has  already  a  character  so  well 
formed  that  there  is  every  reason  to  believe 
that  he  will  have  integrity,  uprightness,  and 
honor  so  ingrained  in  him  that  men  who 
know  him  will  come  to  recognize  that  he  is 
worthy  of  a  trust. 

But  all  those  characteristics,  necessary  as 
they  are,  by  no  means  serve  to  designate  the 
man.  Those  characteristics  are  general,  and 
ought  to  be  possessed  by  every  young  man. 

There  are  additional  characteristics  pos- 
sessed by  the  young  man  I  am  picking  out, 
and  they  are  the  ones  which  will  enable  me 
more  definitely  to  designate  him. 

Given  first  those  sound  fundamentals,  — 
good  health,  good  character,  at  least  a  fair 
education,  industry,  and  capacity,  —  we  have 
then  only  determined  the  general  class  from 
which  we  will  pick  our  man.     This  man  I 

45 


Business  and  Education 

am  indicating  does  his  regular  work  well,  but 
he  has  recognized  that  he  must,  as  a  matter 
of  course,  make  his  ordinary  day's  work  a 
matter  of  constant  good  records.  He  sees 
that  he  is  not  entitled  to  special  credit,  and 
is  not  likely  to  receive  extraordinary  rewards 
for  merely  a  record  of  ordinary  good  work, 
and  so  he  has  come  to  recognize  that  those 
lines  which  mark  the  limits  of  his  daily  task 
are  not  barriers  to  his  further  effort.  Those 
lines  merely  mark  the  work  he  has  first  to 
do.  He  has  learned  that  every  occasion  that 
is  offered,  every  opening  that  he  could  him- 
self make,  which  would  permit  him  to  break 
through  those  lines  which  mark  his  special 
daily  duty  and  give  him  a  chance  to  do  other 
work,  is  an  opportunity  of  the  greatest  im- 
portance. That  statement  is  no  platitude; 
data  bearing  on  that  phase  of  a  young  man's 
character  form  one  of  the  most  illuminating 
guides  we  have  in  forecasting  a  career.  It 
tells  the  measure  of  the  man's  coming  useful- 
ness; it  tells  how  quickly  he  will  learn  the 
whole  detail  of  his  business ;  it  tells  whether 
he  has  that  invaluable  spirit  of  co-operation 
without  which  great  success  cannot  be  built. 
The  man  we  are  picking  out  has  learned  that 
lesson.  He  knows  that  of  all  things  neces- 
sary for  his  development  opportunity  is  one 
of  the  most  essential,  —  opportunity  to  work, 
^  opportunity  to  learn.     He  has  found  that 

^  46 


The  Young  Man*s  Future 

\ 
doing  some  other  man's  work  in  addition  to    \ 

his  own  when  occasion  offered,  has  made  \ 
him  master  of  some  other  man's  knowledge, 
and  has  added  greatly  to  his  own  capabilities 
and  his  value.  He  has  found  that  his  true 
salary  is  made  up  of  two  parts;  that  the 
money  he  receives  is  but  one  part  of  it,  the 
opportunity  to  learn  is  the  other.  He  has 
not  feared  he  would  work  too  much  for  the 
salary  he  was  getting,  because  he  has  found 
that  working  is  learning,  and  that  what  he 
is  learning  is  after  all  by  far  the  more  val- 
uable part  of  his  salary. 

When  a  young  man  has  learned  that  an 
added  duty  is  a  new  opportunity  of  great 
value,  when  he  has  learned  that  an  added 
task  is  something  to  be  welcomed  with  en- 
thusiasm, he  has  marked  himself  for  pro- 
motion, he  has  separated  himself  from  those 
of  his  fellows  who  believe  in  making  their 
services  just  balance  their  salaries;  he  has 
opened  the  door  of  opportunity  and  his  prog- 
ress is  likely  to  be  rapid  toward  a  complete 
nlastery  of  the  details  of  his  business. 

I  wish  I  had  the  eloquence  fully  to  empha- 
size the  strength  of  my  belief  in  the  practical, 
hard-headed  sense  of  these  assertions  —  to 
emphasize  my  faith  in  the  result  of  an  every- 
day application  of  them.  If  I  understand 
correctly  any  single  principle  on  which  suc- 
cess is  based,  I  know  that  a  true  one  is  this ; 

47 


Business  and  Education 

Do  more  than  you  have  to  do  that  you 
may  learn  more  than  you  need  to  know 
for  doing  your  own  simple  daily  task,  and 
with  this  broader  doing  and  wider  learn- 
ing you  will  be  laying  the  substantial  foun- 
dation that  is  required  for  any  career  of 
eminence. 

There  is  another  lesson  of  great  value 
which  has  been  learned  by  this  young  man 
whom  I  am  designating  to  you  as  a  future 
bank  president.  He  has  learned  systemati- 
cally to  use  the  time  which  is  available  out- 
side of  his  regular  work.  You  will  find  that 
this  young  man  whom  I  am  singling  out  has 
not  been  satisfied  with  the  progress  he  has 
made  in  the  course  of  his  regular  work.  He 
may  have  started  with  a  broad,  sound  edu- 
cation ;  but  even  so,  he  soon  found  he  would 
need  a  more  specialized  education  if  he  were 
thoroughly  to  master  the  principles  of  his 
business.  He  attacked  this  problem  of  a 
specialized  education  with  the  same  energy 
and  enthusiasm  which  he  has  brought  to  his 
daily  work  at  the  bank.  There  has  been 
nothing  desultory  and  intermittent  about  his 
method.  The  work  has  been  systematically 
planned  and  constantly  carried  on.  The 
work  in  itself  has  been  a  pleasure  in  the 
doing ;  in  its  result  it  has  given  to  this  young 
man  a  specialized  knowledge  and  a  grasp 
of  principles  which  in  the  future  will  be  of 
48 


The  Young  MarCs  Future 

a  value  to  him  greater  than  he  now  can 
comprehend. 

There  is  one  more  characteristic  which  the 
young  man  possesses  and  to  which  I  want  to 
call  your  attention.  It  is  a  characteristic 
which  might  lead  some  of  you  to  doubt  that 
he  was  marked  for  large  success.  You  may 
perhaps  have  thought  that  he  lacked  a  cer- 
tain shrewdness,  that  his  ambition  for  per- 
sonal advancement  was  not  keen  enough, 
that  he  was  a  little  slow-going  when  it  came 
to  forcing  recognition  of  his  own  abilities 
and  hard  work.  Just  there  is  where  you 
may  be  wrong.  This  man's  interest  in  the 
work  has  been  greater  than  his  interest  in 
himself.  To  get  the  thing  rightly  done  has 
been  his  thought  rather  than  merely  to  get 
the  credit  for  doing  it.  In  travelling  along 
the  road  leading  to  success  a  man  should  not 
have  his  eyes  solely  on  the  milestones;  in 
straining  to  see  the  milestone,  which  is  too 
far  ahead,  one  may  fail  to  avoid  the  obstacle 
directly  in  the  path.  That  advice  does  not 
alone  apply  to  the  progress  of  the  young 
man.  It  is  a  truth  that  he  may  well  heed, 
even  after  he  has  reached  a  position  of  much 
influence  and  power.  The  great  man  in 
commerce  to-day  is  the  co-operative  man, 
the  man  who  sees  clearly  the  right  thing  to 
be  accomplished  and  is  willing  to  sink  his 
individuality  to  accomplish  it ;  the  man  who 

4  49 


Business  and  Education 

is  more  interested  in  getting  the  thing  done 
than  he  is  in  getting  credit  for  doing  it.  We 
must  give  great  prominence  to  that  quahty 
of  patience  which  our  future  bank  president 
possesses.  Patience  to  wait  for  personal 
reward,  patience  to  work  co-operatively  with 
others,  a  patience  which  rises  to  self-abne- 
gation before  a  great  work  to  be  done  —  a 
self-abnegation  which  sees  only  the  one 
thing,  and  that  is  the  thing  to  be  accom- 
plished, and  is  willing  to  sink  for  the  time 
the  gratification  of  ambition,  personal  pride, 
and  personal  reward. 

Here  then  is  the  man :  He  has  health,  char- 
acter, ability,  industry.  More  than  that,  he 
has  learned  to  welcome  new  work  as  new 
opportunity,  and  he  has  learned  systemati- 
cally to  use  his  time  outside  of  his  regular 
work  in  gaining  a  specialized  knowledge 
which  will  give  him  a  thorough  grasp  of  the 
principles  of  his  business;  and  then  above 
all  that,  he  has  taken  greater  interest  in  his 
work  than  in  himself.  He  has  cared  more 
for  getting  the  thing  done  right  than  he  has 
for  getting  the  personal  credit  of  doing  it. 

I  have  laid  before  you  the  data  which  will 
enable  you,  with  almost  unerring  accuracy, 
to  name  the  man.  Unless  there  is  some 
defect  of  personality  or  some  accident  of 
opportunity,  the  man  who  best  fits  this  out- 
line will  in  a  decade  stand  out  from  among 

SO 


The  Young  Man*s  Future 

his  fellows  a  leader ;  he  will  be  wearing  the 
honors  of  distinction  and  carrying  the  bur- 
dens of  responsibility,  —  aye,  and  remember 
that ;  he  will  be  carrying  the  burdens  of  re- 
sponsibility!  Perhaps  we  need  not  envy 
him;  perhaps  some  of  you  who,  though  no 
less  faithful,  though  no  less  honest,  but  who 
will  have  held  to  a  humbler  plane,  will  be  the 
happier.  I  am  not  sure  but  you  will.  Cer- 
tainly you  cannot  all  be  bank  presidents. 
We  need  many  privates,  and  comparatively 
few  generals.  Not  a  few  of  you,  filled  with 
ambition  though  you  may  be  to-day,  will  go 
on  year  after  year  in  faithful  regularity, 
holding  places  of  great  trust,  needing 
strength  to  resist  constant  temptation,  ham- 
pered always  by  an  inadequate  income,  and 
never  advancing  to  the  highest  positions. 

When  I  was  honored  by  an  invitation  to 
this  banquet,  I  accepted  because  I  had  a  par- 
ticular message  I  wanted  to  deliver  to  you, 
to  you  in  the  ranks.  I  have  a  suggestion  to 
make  to  the  American  Institute  of  Bank 
Clerks  which,  if  it  meets  with  your  favor, 
may,  I  believe,  work  out  a  plan  of  lasting 
benefit,  both  to  banking  interests  and  to  the 
banking  profession. 

I  have  lately  been  giving  some  attention  to 
the  subject  of  old-age  pensions.  I  have  been 
studying  with  much  interest  the  remarkable 
system  which  is  now  in  operation  in  Ger- 

51 


Business  and  Education 

many,  a  system  under  which  seventeen  mil- 
Hon  of  the  humbler  workers  of  that  nation 
have  been  secured  against  the  fear  of  an  old 
age  of  penury,  a  system  under  which  $150,- 
000,000  is  now  being  annually  distributed 
that  the  workers  of  Germany  may  be  made 
comfortable  in  sickness  and  in  old  age.  It 
is  a  system  smacking  nothing  of  charity,  but 
giving  honorable  and  honestly  earned  com- 
forts to  the  whole  industrial  army  of  the 
German  Empire. 

More  recently  I  have  had  the  pleasure  of 
studying  with  Mr.  Andrew  Carnegie  this 
old-age  pension  problem  as  it  especially 
affects  the  noble  profession  of  teaching.  His 
study  of  the  subject  has,  as  you  all  know, 
resulted  in  a  magnificent  benefaction,  in  the 
creation  of  a  fund  of  $10,000,000,  to  pension 
college  professors  when  they  reach  a  resting 
point  in  their  careers  of  usefulness.  Public 
opinion  seems  pretty  generally  agreed  that 
no  more  wise  benefaction  could  have  been 
made  by  the  great  philanthropist. 

I  believe  there  are  other  classes  entitled 
to  security  against  an  old  age  of  poverty, 
in  degree  perhaps  less,  but  in  principle  as 
truly  as  are  the  great  teachers  of  the  country. 
The  man  who  lives  a  life  of  integrity,  al- 
though subject  to  constant  temptation,  who 
handles  w^ith  skill,  accuracy,  and  honesty 
vast  sums  of  money  in  his  lifetime,  but  re- 

52 


The  Young  Man's  Future 

tains  but  a  very  modest  amount  as  his  salary 
compensation,  the  man  who  from  the  nature 
of  his  profession  must  keep  a  spotless  record, 
who  may  not  even  take  those  investment 
chances  that  would  be  proper  enough  for 
another  man  to  take,  and  whose  accumula- 
tion for  old  age  must  be  by  patient  saving 
and  conservative  investment  —  such  a  man 
is  entitled  to  consideration.  I  believe  it  is 
wrong  that  such  a  man  need  have  a  fear  that 
after  a  lifetime  of  honest  faithfulness,  of 
industrious  trustworthiness  and  most  mod- 
erate remuneration  and  opportunity,  I  say  I 
believe  it  is  wrong  that  such  a  man  need  have 
a  fear  that  after  he  has  made  that  record 
he  may  still  have  to  face  an  old  age  of  pov- 
erty. It  is  the  strength  of  that  belief  that 
has  brought  me  here  and  which  leads  me  to 
presume  to  make  a  suggestion  to  the  Ameri- 
can Institute  of  Bank  Clerks.  I  believe  that 
as  a  body  the  bank  clerks  of  this  country 
should  be  made  secure  in  the  assurance  that 
a  lifetime  of  faithfulness,  industry,  and  in- 
tegrity shall  be  followed  by  an  old  age 
free  from  want.  There  will  be  a  satisfac- 
tion in  that  sense  of  security  which  every 
bank  clerk  can  afford  to  pay  something  for, 
and  it  will  be  something  that  every  stock- 
holder in  any  banking  institution  can  well 
afford  to  pay  something  for,  and  to  pay 
substantially. 

S3 


Business  and  Education 

My  suggestion,  then,  is  that  the  American 
Institute  take  up  this  subject,  study  it  in  the 
hght  of  what  has  been  done  in  other  coun- 
tries, study  it  in  the  Hght  of  some  beginnings 
which  have  been  made  here,  confer  with 
bank  officers,  and  finally  evolve  a  plan  which 
will  meet  with  the  general  approval  of  the 
banking  interests  of  the  country.  And  I 
am  here  now  to  say  that  when  you  have 
done  that,  the  institution  of  which  I  am  an 
officer,  will,  if  you  will  permit,  have  great 
pride  in  heading  with  its  name  the  list  of 
banks  accepting  the  responsibilities  of  the 
plan. 

I  have  much  faith  in  the  useful  purposes 
which  the  Institute  of  Bank  Clerks  may 
serve.  Such  meetings  as  this  cannot  but 
be  useful.  The  spirit  of  systematic  study 
which  is  being  encouraged  by  the  educa- 
tional department  is,  I  believe,  of  immense 
value.  The  whole  movement  can  be  so  di- 
rected as  to  awake  new  interest  in  the  day's 
work,  and  draw  out  new  ambitions.  I  believe 
there  never  was  before  a  keener  demand  for 
thoroughly  trained  men  than  there  is  to-day. 
I  believe  there  were  never  before  greater 
opportunities  for  such  men,  and  surely  there 
were  never  before  anything  like  such  great 
rewards.  There  is  little  in  the  outlook  that 
need  be  discouraging  to  the  young  man  of 
ambition;  there  is  much  that  should  call 
54 


The  Young  Man's  Future 

forth  from  him  the  best  possible  display  of 
his  powers.  The  American  Institute  of  Bank 
Clerks  may  be  made  an  important  instru- 
ment in  this  work,  and  I  hope  it  is  to  go 
on  to  years  of  great  usefulness. 


55 


TRADE    SCHOOLS    AND   LABOR 
UNIONS 

The  World's  Work,  1906. 

When  a  few  years  ago  the  newspapers 
coined  the  phrase,  "  The  American  Com- 
mercial Invasion  of  Europe,"  it  came  into 
instant  popularity.  We  thought  it  a  most 
happy  way  of  describing  the  entrance  of  the 
United  States  into  the  world's  competitive 
markets.  Indeed,  for  a  time,  it  was  a  phrase 
that  brought  apprehension  to  foreign  na- 
tions'; for  our  progress  was  so  rapid,  our 
competition  became  so  severe,  that  it  was 
difficult  to  say  where  the  conquest  was  to 
stop.  Later  events,  however,  demonstrated 
that  it  could  not  go  on  unhalted. 

It  is  true  that  we  are  still  proud,  and  have 
much  good  reason  to  be  proud,  of  our  success 
in  international  competition.  We  have  seen 
our  exports  of  manufactured  products  double 
and  double  again.  We  have  seen,  with  justi- 
fiable pride,  that  we  are  able  to  make  many 
manufactured  articles  of  commerce  more 
cheaply  than  any  other  people  in  the  world 
can  make  them.  We  have  combined  with 
the  advantage  of  unexampled  supplies  of 
raw  material  an  unequalled  genius  for  doing 
things  on  a  great  scale.    With  notable  clear- 

56 


Trade  Schools 

ness  we  have  seen  the  economic  advantages 
of  great  industrial  combinations.  We  have 
been  quick  to  recognize  industrial  waste, 
whether  in  the  form  of  unneeded  labor,  of 
loss  of  by-products  or  of  unnecessary  trans- 
portation. To  reduce  waste  in  the  form  of 
unnecessary  labor  we  have  taken  full  advan- 
tage of  every  ingenious  machine  which  our 
remarkable  talent  for  mechanical  invention 
could  devise.  We  have  brought  together 
industrial  units  into  huge  combinations,  and 
have  then  administered  them  with  a  far- 
seeing  wisdom  that  has  made  us  able  to 
produce  certain  great  staple  articles  of  man- 
ufacture so  cheaply  that  our  competition  has 
been  the  despair  of  other  nations. 

But  after  we  admit  all  that,  after  we  grant 
that  we  have  a  giant's  crushing  grasp  on  the 
international  industrial  markets  wherever 
we  have  been  able  to  bring  into  play  the 
combination  of  our  advantages  in  cheap  raw 
material  with  the  economies  of  production 
on  a  vast  scale  and  with  the  aids  of  most 
ingenious  labor-saving  machinery  —  after 
granting  all  this,  we  still  must  admit  that  we 
are  a  long  way  from  having  really  gained 
command  of  the  competitive  industrial 
markets. 

It  is  something  of  a  shock  to  reflect  that 
practically  every  victory  we  have  gained  in 
international  competition  has  turned  on  con- 

57 


Business  and  Education 

siderations  of  cheapness  and  not  on  consid- 
erations of  quality.  Our  talent  for  mechan- 
ical invention  seems  unequalled,  and  it  has 
won  us  many  victories  it  is  true,  but,  aside 
from  the  advantage  which  that  special  in- 
genuity gives  us,  there  are  few  articles  we 
bring  to  the  international  markets  upon 
which  we  would  dare  rest  our  success  solely 
on  claims  of  high-grade  workmanship. 
Wherever  we  have  won  success  we  have  as 
a  rule  won  it  because  we  could  manufacture, 
en  masse,  with  wonderful  economy.  We 
have  been  successful  because  we  could  make 
a  thing  cheaper,  —  not  because  we  could 
make  it  better. 

So  far  as  my  recollection  goes,  I  have 
never  found  in  a  European  shop  half  a  dozen 
articles  of  American  manufacture  that  were 
offered  because  they  were  superior  to  similar 
articles  of  European  manufacture.  They 
may  have  been  offered  because  they  were 
more  ingenious,  they  may  have  been  made  on 
such  a  scale  of  production,  turned  out  with 
such  economy,  in  an  endless  grist  from  some 
great  automatic  machine,  that  they  chal- 
lenged comparison  in  cheapness;  but  it  is 
rare  indeed  to  find  in  Europe  an  article  of 
American  manufacture  that  is  offered  solely 
on  the  ground  of  superior  workmanship.  If 
real  accuracy  of  workmanship  is  wanted,  if 
artistic  form  and  taste  are  desired,  if  thor- 

5S 


Trade  Schools 

oiighly  skilled  and  trustworthy  handicraft 
is  sought,  it  will  not  as  a  rule  be  found  in  a 
display  of  American  wares.  If  we  look  for 
a  production  that  has  had  worked  into  it 
some  of  the  soul  and  the  character  of  the 
workman  who  made  it  we  will  rarely  find  it 
bearing  the  legend :   "  Made  in  America." 

We  must  recognize  that  the  great  indus- 
trial development  which  we  have  seen  take 
place  within  our  memories  has  had  its  main 
foundations  built  up  of  something  else  than 
of  superior  manual  skill.  These  foundations 
are  to  be  found  in  cheap  raw  material,  in  the 
economies  of  manufacturing  on  a  vast  scale, 
and  in  the  aids  given  by  the  greatest  utili- 
zation of  labor-saving  mechanical  devices. 
It  has  been  a  perfectly  logical  and  natural 
consequence  that  in  building  a  great  indus- 
trial success  upon  such  factors  as  these  we 
should  for  a  time  sacrifice  highly  skilled 
handicraft.  We  have  seen  the  subdivision 
of  work  carried,  in  our  great  manufacturing 
establishments,  to  the  highest  imaginable 
point.  As  a  result  we  have  seen  the  demand 
for  skill  diminish.  It  has  seemed  for  the 
time  being  that  all  that  is  necessary  is  to 
teach  a  man  to  tend  a  machine,  to  make  him 
an  automatic  wheel  in  the  mechanism,  and 
then  to  ask  nothing  more  of  him  in  the  way 
of  brain  or  breadth  of  understanding  or  of 
thoughtful  outlook. 

59 


Business  and  Education 

Men  rejoiced  at  the  accomplishment  of  an 
invention  which  would  do  with  perfectness 
tasks  which  before  had  required  many  hands 
skilled  by  long  training.  When  the  output 
of  such  a  machine  was  placed  in  competition 
wath  the  hand-made  goods  of  other  countries 
WQ  gathered  for  a  time  new  laurels  in  the 
progress  of  our  commercial  invasion.  Then 
our  competitors  came  to  study  our  methods 
and  to  appropriate  our  ideas. 

We  have  carried  on  this  system  of  special- 
ization and  have  adopted  these  mechanical 
aids  to  such  an  extent  that  in  certain  lines 
we  can  manufacture  cheaply  enough  to  have 
little  to  fear  from  competition  in  any  quar- 
ter, and  we  can  at  the  same  time  pay 
wages,  even  to  our  automatic  workers,  that 
are  a  marvel  to  the  w^age  earners  of  other 
countries. 

But,  with  all  these  advantages,  we  are  be- 
ginning to  find  that  there  are  countervailing 
losses.  While  we  have  made  it  possible  for 
the  unskilled  man  to  tend  a  machine  and 
turn  out  the  product  with  wonderful  econ- 
omy, we  are  now  beginning  to  find  that,  in 
keeping  that  man  confined  to  tending  the 
machine,  in  giving  him  no  intellectual  inter- 
est in  his  work  and  no  opportunity  for  any 
but  the  narrowest  outlook  upon  the  field  of 
industry  in  which  he  is  engaged,  we  have 
unintentionally  taken  almost  certain  means 
60 


Trade  Schools 

to  prevent  his  mental  and  technical  develop- 
ment. We  have  of  late  heard  much  of  the 
call  of  the  employer  for  skilled  men  to  super- 
vise work.  We  have  heard  employers  mar- 
vel that,  while  the  lowest  paid  ranks  of  their 
workmen  are  fully  supplied,  they  have  the 
greatest  difficulty  in  finding  men  to  fill  the 
higher  positions.  The  reason  is  of  course 
most  obvious.  Men  need  training  to  become 
skilful.  They  must  have  variety  of  work  if 
their  outlook  and  technical  skill  are  to  have 
breadth.  They  must  know  something  of 
principles  if  they  are  to  have  original  ideas 
of  value.  I  believe  that  we  have  failed 
utterly  to  grasp  the  problem  of  the  relation 
between  education  and  our  industrial  devel- 
opment and  prosperity. 

Within  the  memory  of  most  Americans 
there  has  been  what  amounts  to  nothing 
short  of  a  revolution  in  industrial  affairs. 
We  have  seen  England  lose  much  of  her  pre- 
eminence among  the  industrial  nations.  We 
have  seen  two  other  nations  grow  from  com- 
paratively small  beginnings  to  places  of  the 
first  rank.  I  have  indicated  what  I  believe 
to  be  the  principal  elements  upon  which  our 
own  industrial  success  has  been  based.  But 
we  have  seen  another  nation  without  the 
special  advantages  of  raw  material  which  we 
have  enjoyed  push  forward  in  a  development 
as  rapid  as  ours,  and  wrest  from  others  in 

6i 


Business  and  Education 

the  competitive  fields  the  advantage  they 
had  long  held  in  security.  Germany  has  had 
the  scantiest  aid  from  nature  to  make  that 
progress  possible.  Not  only  has  she  had  no 
wealth  of  raw  material  such  as  we  have  had ; 
she  has  had  no  vast  homogeneous  domestic 
market,  a  factor  which  has  been  of  vital  aid 
in  building  up  our  own  manufactures.  Her 
people  have  lacked  the  peculiar  inventive 
ingenuity  which  has  in  many  fields  of  indus- 
try been  the  sole  basis  for  our  achievements. 
Her  artisans  have  not  possessed  that  delicate 
artistic  sense  which  has  made  the  handiwork 
of  France  superior  to  the  obstructions  of  all 
tariff  walls.  Her  industries  have  been  forced 
to  grapple  with  English  competitors  who 
were  entrenched  behind  a  domination  of 
international  markets  successfully  main- 
tained for  generations.  But  amidst  a  pov- 
erty of  natural  resources,  and  from  among 
a  people  not  singularly  gifted  either  with 
inventive  ability  or  artistic  temperament,  we 
have  seen  emerge  in  a  generation  the  great 
industrial  forces  of  the  German  Empire. 

The  time  is  within  the  memory  of  most  of 
us  when  Germany  was  in  large  measure  an 
agricultural  state  winning  but  meagre  re- 
turn from  sterile  acres.  There  were  neither 
rich  mines  below  ground  nor  exhaustless 
forests  above.  Whatever  was  done  by  the 
Germans  had  to  be  done  in  the  sweat  of  their 
62 


Trade  Schools 

brows.  Whatever  they  have  accompHshed 
we  must  admit  they  have  fairly  earned,  for 
they  have  been  heirs  to  few  bounties  of 
nature. 

I  have  made  a  somewhat  careful  study  of 
Germany's  economic  success,  and  in  doing 
that  I  have  become  firmly  convinced  that  the 
explanation  of  the  remarkable  German  prog- 
ress is  to  be  traced  in  the  most  direct  man- 
ner to  the  German  system  of  education. 
The  schoolmaster  is  the  great  corner-stone 
of  Germany's  remarkable  commercial  and 
industrial  progress.  The  school  system  of 
Germany  bears  a  relation  to  the  economic 
situation  that  is  not  met  with  in  any  other 
country. 

We  all  know  something  of  the  thorough 
secondary  education  which  the  compulsory 
education  laws  of  Germany  insist  shall  be 
given  to  every  youth  under  fourteen.  We 
all  know  something  of  the  high  standing  of 
her  universities  and  the  great  practical  value 
of  her  technical  schools.  There  is  another 
feature  of  the  German  educational  system, 
however,  about  which  less  is  known  in  this 
country,  but  which  is,  I  believe,  a  feature 
of  the  most  direct  importance  in  shaping 
Germany's  industrial  progress. 

There  is  a  division  of  instruction  in  Ger- 
many known  as  continuation  trade  schools. 
These  schools  are  designed  for  the  instruc- 

63 


Business  and  Education 

tion  of  youths  engaged  in  regular  industrial 
employment.  They  are  auxiliary  to  the 
ordinary  schools,  and  entirely  outside  of  the 
scheme  for  regular  academic  training  or  of 
higher  technical  instruction.  They  are  for 
the  rank  and  file  of  workers,  for  the  privates 
of  the  industrial  army.  The  courses  are  so 
arranged  that  they  supplement  the  cultural 
training  that  the  youths  have  had  in  the  reg- 
ular school  system,  and  at  the  same  time 
supplement  the  technical  routine  of  the  shop 
or  the  office. 

The  students  in  these  trade  schools  are 
youths  who  have  completed  the  regular  com- 
pulsory educational  course  and  have  gone 
out  into  the  ranks  of  active  industrial  and 
commercial  workers.  The  hours  of  instruc- 
tion are  so  arranged  that  they  fall  outside 
the  regular  hours  of  labor.  The  curriculum 
is  broadly  practical.  It  includes  the  science 
of  each  particular  trade  —  its  mathematics 
or  chemistry  for  instance  —  and  its  tech- 
nology. But  it  does  not  stop  there.  Prin- 
ciples of  wise  business  management  are 
taught.  The  aim  is  to  prepare  a  student  for 
the  practical  conduct  of  a  business.  He 
gains  knowledge  of  production  and  con- 
sumption, of  markets  and  of  the  causes  of 
price  fluctuations.  He  is  put  into  a  position 
to  acquire  an  insight  into  concrete  business 
relations,  and  into  trade  practices  and  con- 

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Trade  Schools 

ditions.  Are  not  such  aims  worthy  of  Amer- 
ican schools?  What  truer  democracy  can 
there  be  than  a  school  system  that  will  point 
the  way  to  every  worker,  no  matter  how 
humble,  by  which  he  may  reach  a  clearer 
comprehension  of  the  industry  in  which  he 
is  engaged,  and  with  the  aid  of  this  knowl- 
edge may  rise  to  a  position  of  importance  in 
that  industry? 

To  do  all  this  does  not  mean  the  "  com- 
mercializing "  of  our  educational  system. 
There  is  no  need  for  opposition  even  from 
those  who  hold  that  it  is  not  the  place  of  the 
schools  to  teach  youths  how  to  earn  a  liveli- 
hood. Those  educators  who  lay  strongest 
emphasis  upon  such  phrases  as  "  character 
formation,"  "  mental  discipline,"  and  "  har- 
monious cultivation  of  the  faculties  "  may 
continue  to  hold  firmly  to  those  views  and  at 
the  same  time  welcome  an  auxiliary  school 
system  which,  without  curtailing  their  ideal 
culture  courses,  will  give  after  the  ordinary 
period  of  school  life  is  over  the  opportunity 
for  valuable  practical  instruction. 

Such  an  auxiliary  system  of  trade  schools 
would  be  available  for  the  youth  only  after 
he  has  left  the  direct  influence  of  our  present 
school  system.  There  are  in  the  United 
States  10,000,000  youths  from  fifteen  to 
twenty  years  old.  Three-quarters  of  that 
number  are  not  in  attendance  at  any  school. 

S  65 


Business  and  Education 

Here  are  seven  and  one  half  millions  of 
young  people  from  whom  the  students  of 
such  trade  schools  would  be  drawn. 

Surely  it  needs  little  training  in  the  econ- 
omies of  industry  to  comprehend  what  an 
unreckonable  advantage  it  would  be  if 
a  substantial  proportion  of  that  seven 
and  one  half  millions  were  to  be  brought 
within  the  influence  of  a  new  and  entirely 
practical  system  of  education  designed  to 
make  each  pupil  a  more  efficient  economic 
unit. 

The  present  generation  of  American  youth 
entering  industrial  or  commercial  life  is  to 
encounter  new  and  in  some  respects  harder 
conditions.  So  far  as  we  conceive  educa- 
tion to  be  in  any  sense  a  preparation  for 
practical  life,  there  have  been  laid  upon  us 
new  demands  and  fresh  responsibilities.  The 
industrial  life  of  this  country  has  in  a  decade 
undergone  changes  more  significant  than 
had  been  encompassed  before  in  a  period 
of  two  generations.  Teachers  whose  lives 
have  been  largely  in  the  classroom  are  not 
likely  to  have  comprehended  fully  the  true 
significance  of  the  development  of  the  forces 
of  combination.  There  has  been  combina- 
tion in  the  field  of  labor  as  evidenced  in  the 
growing  power  of  unionism;  combination 
in  the  domain  of  capital  as  manifested  in  the 
trusts;    concentration  in  the  control  of  in- 

66 


Trade  Schools 

dustrles,  in  the  subdivision  of  labor,  and  in 
the  aggregation  of  wealth. 

This  display  of  the  forces  of  combination, 
equally  significant  in  the  fields  of  labor  and 
of  capital,  has  brought  changed  conditions  in 
the  problem  of  human  industrial  endeavor. 
The  welfare  of  the  people  and  the  position 
which  our  country  is  to  maintain  among 
nations  both  depend  on  no  single  thing  more 
than  on  the  recognition  of  these  changed 
conditions  by  our  educators.  They  must 
recognize  the  new  demands  of  the  times. 
They  must  provide  the  educational  requi- 
sites which  these  changed  conditions  make 
imperative. 

The  forces  of  combination  —  the  labor 
union  and  the  trusts  —  are  united  and  are 
working  in  harmony  to  accomplish  at  least 
one  thing.  They  are  united  in  a  tendency 
to  make  commercial  or  industrial  autom- 
atons of  a  great  percentage  of  our  popula- 
tion. They  both  tend  to  subdivide  labor,  and 
thereby  to  limit  the  opportunity  to  acquire  a 
comprehension  of  broad  principles.  They 
both  tend  to  circumscribe  the  field  of  the 
apprentice,  narrowing  his  opportunity,  forc- 
ing him  into  petty  specialization  and  restrict- 
ing his  free  and  intelligent  development. 
All  this  is  placing  us  in  grave  danger  of 
evolving  an  industrial  race  of  automatic 
workers,  without  diversity  of  skill,  without 

67 


Business  and  Education 

an  understanding-  of  principles,  and  without 
a  breadth  of  capability. 

There  is  but  one  power  that  can  counteract 
that  tendency  —  the  schoolmaster.  Youths 
who  can  gain  from  their  daily  work  only 
that  narrow,  routine,  technical  experience  — 
which  in  the  main  is  all  that  the  conditions 
of  modern  industry  offer  —  have  a  right  to 
something  more.  They  have  a  right  to  op- 
portunity for  a  practical  education.  As  mod- 
ern conditions  narrow  their  technical  train- 
ing, those  same  conditions  broaden  the  op- 
portunity for  the  man  who  does  acquire 
knowledge  which  will  give  him  a  grasp  of 
more  than  a  single  detail  of  his  business.   ^ 

The  mental  equipment  of  a  business  man 
needs  to  be  greater  to-day  than  was  ever 
before  necessary.  Just  as  the  sphere  of  a 
business  man's  activity  has  broadened  with 
the  advent  of  rapid  transportation,  tele- 
graphs, cables,  and  telephones,  so  has  the 
need  of  a  broad  understanding  of  sound 
principles  increased.  It  was  steam  processes 
of  transportation  and  production  that  really 
made  technical  education  necessary.  The 
electric  dynamo  created  the  demand  for 
technically  educated  electrical  engineers,  and 
the  railroad,  the  fast  steamship,  the  electric 
current  in  telephone  and  cable  and  the  great 
economic  business  combinations  are  making 
the  science  of  business  a  different  thing  from 

68 


Trade  Schools 

any  conception  of  commerce  which  would 
have  existed  two  generations  ago.  The  en- 
larged scope  of  business  is  demanding  better 
trained  men  —  men  who  understand  prin- 
ciples. New  forces  have  made  possible  large- 
scale  production,  and  we  need  men  who  can 
comprehend  the  relation  of  that  production 
to  the  world's  markets.  There  has  been  in- 
troduced such  complexity  into  modern  busi- 
ness, and  such  a  high  degree  of  specializa- 
tion, that  the  young  man  without  the  foun- 
dation of  an  exceptional  training  is  in  danger 
of  remaining  a  mere  clerk  or  bookkeeper. 
Commercial  and  industrial  affairs  are  con- 
ducted on  so  large  a  scale  that  the  neophyte 
has  little  chance  to  learn  broadly  either  by 
observation  or  by  experience.  He  is  put  at 
a  single  task.  The  more  expert  he  becomes 
at  it  the  more  likely  it  is  that  he  will  be  kept 
at  it,  unless  he  gains  a  training  which  fits 
him  to  comprehend  in  some  measure  the  re- 
lation of  his  task  to  those  tasks  which  others 
are  doing. 

I  do  not  believe  it  is  enough  for  us  to  say 
that  we  will  give  to  our  youths  the  best  edu- 
cation possible  to  train  them  as  intelligent 
citizens.  I  do  not  believe  it  is  enough  to 
give  them  a  few  years  of  elementary  educa- 
tion and  when  they  go  forth  to  actual  work, 
offer  them  no  educational  aid  or  training 
to  better  comprehend  the  principles  in  the 

69 


Busmess  and  Education 

field  of  industry  in  which  their  lives  are 
c^st. 

Many  noble  teachers  have  held  a  beautiful 
theory  that  their  work  should  be  devoted  to 
building  up  character  and  culture  in  a  youth. 
They  would  so  garb  him  in  an  armor  of 
sweetness  and  light,  so  instil  into  his  mind 
the  love  of  the  beautiful  and  build  up  gen- 
erally by  cultural  instruction  his  mental  char- 
acteristics that  for  such  a  youth  any  labor 
would  be  dignified,  and  he  would  be  pro- 
vided with  springs  of  learning  and  appreci- 
ation from  which,  without  regard  to  material 
surroundings,  he  could  always  drink  with 
the  deepest  satisfaction.  That  is  the  ideal 
of  those  who  believe  that  we  must  beware 
of  commercializing  our  educational  system, 
who  believe  that  we  should  aim  at  the  train- 
ing of  character,  the  giving  of  culture,  and 
waste  none  of  the  youth's  precious  time  with 
instruction  in  trades  and  occupations.  It  is 
a  noble  ideal,  but  we  must  recognize  the  fact 
that  a  boy  set  to  forge  such  an  ideal  armor 
before  he  is  fifteen  years  of  age  will  find  it  an 
imperfect  protection  against  the  difficulties 
of  modern  industrialism. 

What  I  believe  we  need  is,  not  a  radical 
change  in  our  present  school  system,  but 
rather  a  material  addition  to  it.  I  am  con- 
fident that  the  present  system  of  education 
does  not  meet  the  present  requirements  of 
70 


Trade  Schools 

commercial  and  industrial  conditions.  From 
the  youth  who  must  early  earn  his  own  living 
I  believe  we  have  taken  away  the  advantages 
of  school  training  at  too  early  an  age.  There 
is  a  vast  army  of  young  men  actively  em- 
ployed in  commercial  and  industrial  callings 
who  feel,  or  can  be  made  to  recognize,  the 
great  need  which  they  have  for  a  better 
understanding  of  the  principles  of  their 
business,  and  who  recognize  clearly  enough 
that  these  principles  cannot,  except  in  the 
rarest  of  cases,  be  learned  at  the  workbench 
or  at  the  desk  under  the  present  condi- 
tions of  modern  commercial  and  industrial 
life. 

I  am  convinced,  too,  that  Germany's  in- 
dustrial success  and  the  comparative  content- 
ment of  her  population  are  in  a  very  large 
measure  due  to  her  system  of  trade  schools. 
Now  I  want  to  leave  no  confusion  in  the 
minds  of  my  readers  as  to  just  what  I  mean 
by  these  trade  schools.  I  do  not  mean  the 
addition  of  manual  training  to  the  course 
of  the  public  schools ;  that  may  or  may  not 
be  wise,  but  the  decision  of  that  question  has 
no  bearing  whatever  on  the  sort  of  school  I 
have  in  mind.  I  do  not  mean  the  establish- 
ment of  schools  to  teach  young  men  trades. 
I  know  that  such  schools  have  been  open  to 
much  criticism  from  practical  workers  and 
will  meet  much  opposition  from  labor  unions. 

71 


Business  and  Education 

I  recognize  force  in  the  hostile  attitude  of 
organized  labor  in  regard  to  schools  designed 
to  teach  trades.  Their  point  of  view  may  be 
selfish,  but  it  is  perfectly  human.  I  do  not 
mean  either  that  we  have  any  lack  of  higher 
technical  schools.  I  think  we  are  fully 
abreast  of  the  rest  of  the  world  in  the  facil- 
ities we  offer  for  training  our  captains  of 
industry. 

It  is  the  rank  and  file  that  I  am  consider- 
ing, the  privates  of  the  great  industrial  army 
who  have  gone  forth  to  the  daily  grind  of 
work,  taking  with  them  such  mental  equip- 
ment as  our  school  system  has  been  able  to 
give  to  youths  of  fourteen  or  sixteen  years. 
These  young  men  are  fitted  into  the  great 
industrial  and  commercial  organizations, 
and  come  under  the  influence  of  our  system 
of  specialization  and  of  our  development  of 
automatic  machines.  They  face  at  once  the 
danger  of  becoming  automatic  workers.  On 
the  other  hand,  industry  and  commerce  are 
squarely  facing  the  very  grave  danger  of 
training  up  an  army  composed  solely  of  au- 
tomatic workers  —  an  army  that  will  be 
without  active  intelligence  or  effective  train- 
ing in  considering  the  requirements  and  de- 
velopment of  the  industries  with  which  it  is 
engaged.  I  believe  we  need  to  establish  for 
the  members  of  this  army  a  means  which  will 
aid  them  to  gain  a  supplementary  education 
72 


Trade  Schools 

along  lines  particularly  adapted  to  their 
requirements. 

Some  of  us  are  apt  to  find  much  fault  with 
the  labor  situation.  We  criticise  the  attitude 
of  trades-unions  and  the  demands  of  labor 
organizers.  Might  it  not  be  well  to  remem- 
ber that  we  have  created  an  industrial  con- 
dition in  which,  in  a  very  large  measure,  one 
man's  work  is  exactly  like  another's;  and 
in  certain  fields,  the  work  of  all  largely  auto- 
matic, that  our  industrial  situation  is  doing 
quite  as  much  as  the  labor  organizers  to  re- 
duce to  a  dead  level  of  equality  the  value  of 
men's  time  in  certain  industrial  lines? 

If  we  want  men  who  will  think  for  them- 
selves, must  we  not  give  them  a  training 
which  will  enable  them  to  think  correctly? 
If  we  want  men  to  become  attached  to  their 
work  and  their  positions,  must  we  not  give 
them  an  intellectual  interest  in  that  work? 
If  we  want  independence  of  thought  in  a 
workingman,  must  we  not  provide  him  with 
the  opportunity  to  be  something  more  than 
an  automatic  figure  revolving,  without  voli- 
tion, interest  or  active  intelligence,  as  the 
wheels  of  industry  revolve  ?  From  the  point 
of  view  alone  of  the  attitude  of  the  working- 
man  toward  the  industrial  problems  of  the 
day  I  believe  we  are  doing  less  than  our  duty 
in  the  way  of  education,  and  very  far  less 
than  the  selfish  interests  of  capital  would 

73 


(    UNIVERSITY  \ 


Business  and  Education 

demand  if  employers  had  a  clearer  vision  on 
this  subject. 

Americans  have  thought  and  talked, much 
about  the  need  for  educating  the  sovereign 
citizens  of  a  democracy.  To-day  we  are  face 
to  face  with  this  fact.  We  have  come  to 
have  within  our  republic  another  democracy. 
In  importance  it  is  second  only  to  that  of  the 
State  itself.  It  is  the  democracy  of  organized 
labor;  a  democracy  of  representative  gov- 
ernment demanding  an  intelligent  constitu- 
ency if  it  is  to  have  intelligent  administra- 
tion. There  are  times  when  the  welfare  of 
more  people  is  directly  affected  by  the  de- 
liberations of  a  council  of  labor  leaders  than 
would  be  concerned  over  a  vote  in  Congress 
on  a  measure  of  prime  importance  in  national 
legislation. 

Americans  long  ago  grasped  the  idea  that 
education  is  necessary  in  a  republic.  That  is 
the  corner-stone  of  the  theory  of  our  govern- 
ment. We  long  since  recognized  that  an  in- 
telligent, representative  government  could 
only  come  out  of  intelhgent  citizenship. 
That  fact  is  just  as  true  of  the  democracy  of 
united  labor  as  it  is  of  the  democracy  of  the 
republic.  It  is  no  academic  theory,  it  is  a 
hard  practical  fact,  of  immediate  application 
to  the  welfare  of  capital  and  labor  alike. 

If  I  may  again  turn  to  Germany  for  an 
illustration,  I  would  say  that  one  of  the  most 

74 


Trade  Schools 

important  influences  which  has  been  working 
toward  the  intelHgent  moderation  of  the  atti- 
tude of  organized  labor  is  to  be  found  in  the 
superior  education  of  the  workers  —  in  the 
educational  system  which  has  provided  or- 
ganized labor  with  leaders  who  have  a 
broader  grasp  of  the  problems  of  industry 
and  a  clearer  understanding  of  its  principles 
than  they  could  have  had  without  special 
educational  advantages. 

If  it  can  be  demonstrated  that  this  is  a 
correct  view  —  that  moderate  and  wise  ad- 
ministration of  the  great  democracy  of  or- 
ganized labor  is  more  likely  to  follow  if 
the  masses  of  workmen  are  educated  toward 
a  better  intellectual  comprehension  of  the 
principles  of  the  industries  with  which  they 
are  engaged  —  then  what  money  value  could 
be  put,  in  this  country,  upon  such  a  system 
of  education  as  would  ultimately  give  to 
organized  labor  wiser  leaders?  I  believe 
there  is  a  profound  and  important  truth  in 
this  view.  If  we  drift  toward  a  condition 
in  which  automatic  workers  live  without  in- 
tellectual interest  in  their  labor  we  must 
expect  them  to  follow  —  without  indepen- 
dence of  thought  —  unwise  leaders  along 
paths  that  will  be  destructive  for  capital  and 
labor  alike.  If  we  offer  educational  facili- 
ties that  will  tend  to  train  a  considerable 
number  of  the  youths  following  industrial 

75 


Busmess  and  Education 

callings  so  that  they  will  better  comprehend 
the  nature  of  their  work  and  its  relation  to 
the  whole  industrial  organization,  if  we  will 
provide  schools  that  will  awaken  an  intel- 
lectual interest  in  the  day's  task  and  kindle 
ambition  which  will  lead  men  on  to  better 
work  and  greater  contentment,  we  shall  ac- 
complish a  step  in  the  development  of  our 
educational  system  which  will  be  of  greater 
importance  than  any  other  change  in  educa- 
tional methods  that  is  now  under  consider- 
ation. 

I  want  to  assert  with  all  the  force  which 
my  conviction  on  the  subject  will  give  that 
such  a  thing  is  not  a  dream.  There  is  a 
vital  demand  for  the  development  of  our 
educational  system  along  such  lines  as  I 
have  been  indicating.  When  I  speak  of  the 
youth  whose  life  has  been  cast  in  an  indus- 
trial calling  keenly  desiring  to  find  the  means 
for  gaining  an  intellectual  understanding  of 
his  surroundings  I  am  not  speaking  of  con- 
ditions which  I  imagine  to  exist.  Out  of  my 
own  personal  experience  I  know  something 
of  this  subject. 

I  started  life  as  an  apprentice  in  a  machine 
shop,  with  the  mental  training  which  a 
country  school  gives  to  a  boy  of  sixteen.  I 
supposed  at  that  time  I  should  always  follow 
the  career  of  a  mechanic,  and  very  early  in 
my  apprenticeship  I  was  strongly  moved  to 

76 


Trade  Schools 

get  some  intellectual  grasp  of  the  work.  But 
although  I  was  in  a  community  proud  of 
its  schools,  it  had  nothing  to  offer  to  youths 
whose  days  were  fully  taken  up  with  their 
regular  occupations.  With  considerable  dif- 
ficulty I  found  a  man  who  could  teach  me 
drafting,  another  who  was  willing  to  give 
instruction  in  mathematics.  I  want  to  em- 
phasize that  I  was  not  one  whit  different 
from  my  fellows  in  blue  overalls.  Much  of 
the  money  that  I  spent  to  pay  my  own  in- 
structors I  earned  by  teaching  mathematics 
out  of  working  hours  to  my  shopmates. 
They  were  quite  as  keen  as  I  for  an  oppor- 
tunity to  get  an  intellectual  outlook  on  the 
business  in  which  they  were  engaged.  They 
had  no  desire  to  be  mere  tenders  of  machines. 
I  am  confident  that,  if  the  opportunity  had 
been  at  hand,  a  considerable  portion  of  these 
young  men  would  have  entered  with  zealous 
interest  upon  a  systematic  educational  de- 
velopment if  it  had  been  shaped  along  lines 
that  made  its  practical  application  to  their 
daily  work  apparent. 

Let  me  summarize  my  convictions  on  this 
subject.  We  have  in  a  brief  period  built  up 
a  striking  industrial  success.  The  main  ele- 
ments of  that  success  have  been  threefold : 
First,  cheap  raw  material ;  second,  ingenious 
labor-saving  inventions;  third,  industrial 
combinations  resulting  in  the  great  economies 

77 


Business  and  Edtucation 

of  production  on  a  large  scale.  Our  success 
in  the  international  markets  has  in  the  main 
been  built  on  cheapness,  not  on  quality. 

The  very  nature  of  our  success  has  been 
such  that  it  has  minimized  the  value  of  su- 
perior handicraft.  The  character  of  large- 
scale  production,  the  effect  of  the  sub- 
division of  labor  and  the  result  of  the  exten- 
sive use  of  labor-saving  devices  have  united 
in  a  tendency  to  make  automatons  of  our 
workers.  That  tendency  is  of  necessity  in- 
creased by  some  phases  of  the  organizations 
of  labor. 

The  result  is  a  changed  order  in  industrial 
life.  In  many  fields  of  industry,  indeed  in 
many  phases  of  commercial  life  also,  it  is 
only  the  rarely  exceptional  man  who  is  able 
to  raise  himself  above  the  deadening  influ- 
ence of  his  surroundings  —  surroundings 
that  give  him  a  single  specialized  task  to 
perform  and  demand  of  him  no  intellectual 
interest,  no  understanding  of  the  principles 
of  the  industry,  no  ambition  for  a  broader 
technical  skill. 

The  man  without  intellectual  interest  in 
his  work,  without  understanding  of  the  re- 
lation of  his  task  to  other  things,  and  with- 
out ambition  pushing  him  steadily  toward 
technical  improvement,  is  in  a  dangerous 
position.  That  he  is  in  a  position  dangerous 
to  himself  is  obvious,  for  if  men  live  lives 

78 


Trade  Schools 

lacking  incentive  to  improvement  they  will 
deteriorate.  That  he  is  in  a  position  dan- 
gerous to  industry  is  also  evident,  for  no 
bounty  of  nature,  no  industrial  combination 
however  high,  no  mechanical  invention  how- 
ever ingenious,  can  succeed  with  directing 
intelligence  without  that  united  skill  of  hand, 
of  brain,  of  broad  experience,  which  can 
only  come  from  men  properly  trained  in  the 
ranks. 

But  such  a  man  not  only  is  in  danger; 
even  more,  he  is  a  danger.  He  is  a  danger 
to  the  state.  We  have  to  admit  that  the 
prosperity  and  security  of  the  state  itself  lie 
in  the  direction  of  wise  leadership  for  the 
gigantic  forces  of  organized  labor.  Such 
wise  leadership  will  only  be  born  out  of  a 
wise  constituency.  Every  argument  that 
can  be  advanced  for  the  education  of  a  citi- 
zen of  a  republic  applies  with  as  great  force 
to  the  still  broader  education  that  is  needed 
by  those  who  shape  the  course  and  decide  the 
destinies  of  the  democracy  of  organized 
labor.  If  to  be  a  good  citizen  requires  a 
comprehension  of  the  form  of  our  govern- 
ment, a  knowledge  of  the  principles  of  civics, 
a  development  of  a  sense  of  the  responsi- 
bility of  citizenship,  and  a  comprehension 
of  the  sacredness  of  a  public  trust,  then  just 
as  truly  it  is  due  the  state  that  a  member  of 
a  labor  organization  should  have  in  addition 

79 


Business  and  Education 

to  the  ordinary  equipment  of  the  citizen  an 
understanding  of  the  principles  of  industry, 
a  comprehension  of  the  relation  and  im- 
portance of  the  various  parts  of  the  indus- 
trial organization  —  a  breadth  of  industrial 
view,  in  brief,  and  an  understanding  of  eco- 
nomic principles. 

Our  school  system  has  not  thus  far  pro- 
vided this,  but  it  is  not  a  difficult  thing  to 
provide.  It  means  no  revolutionary  change 
in  our  present  system.  It  means  only  an 
addition.  The  step  is  not  a  pioneer  one. 
The  system  is  at  work  in  Germany  on  a  huge 
scale,  attracting  hundreds  of  thousands  of 
youths  to  its  benefits  and  profoundly  affect- 
ing the  industrial,  indeed  the  whole  national, 
life  of  that  empire.  To  make  the  experi- 
ment here  would  involve  no  possible  danger, 
would  interfere  in  no  unfortunate  way  with 
our  present  school  system,  would  entail  no 
expense  worthy  of  consideration.  All  that 
is  necessary  is  for  American  manufacturers 
and  business  men  to  see  the  worth  of  the 
experiment.  Exactly  the  means  to  bring 
into  play  could  be  soon  decided. 

My  own  belief  is  that  the  movement 
should  be  partly  individual,  partly  the  devel- 
opment of  the  public-school  system.  I  be- 
lieve the  representatives  of  organized  labor 
and  the  representatives  of  organized  capital 
should  unite  in  planning  the  work.  The 
80 


Trade  Schools 

leaders  of  industry  and  the  leaders  of  labor 
should  give,  not  money  —  the  tax  payers 
can  readily  bear  the  small  additional  burden 
there  would  be  —  but  themselves,  their  hearty 
interest,  their  careful  thought,  their  helpful 
influence  and  good-will.  If  that  is  done  they 
will  bring  an  influence  into  industrial  life 
which  will  be  of  incalculable  value  —  of 
value  ethically,  intellectually,  and  financially 
—  and  will  set  an  example  for  which  the 
whole  country  will  owe  them  gratitude. 


8i 


THE   BUSINESS    MAN'S    READING 

Saturday  Evening  Post,  Philadelphia,  1902. 

It  is  as  important  for  the  young  business 
man  to  choose  well  in  making  his  literary 
friendships  as  it  is  to  use  care  in  selecting 
his  personal  associates.  Perhaps  the  first 
word  of  advice  in  any  suggestions  regarding 
a  young  business  man's  reading  should  be 
along  the  line  of  impressing  upon  him  the 
desirability  of  making  literary  friends,  but 
it  should  be  hardly  necessary  to  waste  much 
time  in  emphasizing  the  value  of  well-di- 
rected reading  in  advancing  any  business 
career. 

One  of  the  reasons  why  the  young  business 
man  does  not  always  readily  see  the  value  of 
much  reading  is  that  he  is  apt  to  be  of  a 
thoroughly  practical  bent,  and  not  quick  to 
appreciate  the  worth  of  things  that  are  not 
immediately  available  as  means  of  advance- 
ment. If  a  course  of  reading  should  be  out- 
lined with  sound  judgment  for  the  average 
young  man  in  the  early  years  of  his  business 
life,  he  would  be  apt  to  ask  wherein  was  the 
practical  utility  of  the  greater  part  of  it.  If 
he  is  a  bank  clerk,  for  instance,  and  is  told 
82 


The  Business  Man's  Reading 

to  read  political  economy,  it  is  not  at  all  easy 
for  him  to  see  how  such  reading  will  make 
him  a  better  bank  clerk.  It  requires  no 
political  economy  to  total  a  column  of  figures 
correctly.  In  the  bank  clerk's  whole  experi- 
ence he  has  never  been  called  on  for  any  aca- 
demic knowledge  of  that  character,  and  he 
sees  that  he  probably  never  will  be.  To 
waste  time  over  a  lot  of  reading  that  has  no 
practical  application  to  the  work  in  hand 
seems  useless. 

The  thing  that  the  young  business  man 
should  clearly  understand  is  that  a  well- 
directed  course  of  systematic  reading  will 
be  of  value  not  so  much  in  helping  him  better 
to  do  the  work  he  has  in  hand  as  in  preparing 
him  to  do  much  more  important  work.  The 
young  bank  clerk  whose  duties  are  simple 
and  routine  may  ask  what  good  it  will  do 
him  to  know  the  history  and  provisions  of 
the  national  banking  law.  It  will  do  him 
very  little  good  if  he  intends  always  to  be  a 
bank  clerk;  it  may  do  him  a  great  deal  of 
good  if  he  hopes  to  be  a  bank  officer.  One 
should  not,  then,  search  too  closely  for  the 
evidence  of  a  direct  relation  between  a  well- 
outlined  course  of  reading  and  immediate 
advancement  in  his  position.  The  relation 
is  there,  but  the  reader  must  have  faith 
enough  to  do  a  great  deal  of  hard,  earnest 
work  without  expecting  advances  in  salary 

S3 


Business  and  Education 

to  follow  with  the  same  regularity  with 
which  diplomas  would  be  earned  in  school. 

If  any  number  of  successful  business  men 
were  asked  what  thing  it  is  that  the  young 
business  man  most  needs  to  help  him  on  the 
road  to  business  success,  I  believe  the  an- 
swer would  be  unanimous,  and  it  would  be 
—  character.  This  is  not  an  idle  platitude. 
It  is  sound,  practical  judgment,  and  it  will 
be  the  most  strongly  emphasized  by  the  men 
who  are  the  most  experienced  in  affairs.  The 
more  I  see  of  business  life,  the  more  clearly 
I  comprehend  the  great  practical  value,  quite 
apart  from  their  ethical  worth,  of  some  of 
the  well-worn  and  homely  old  maxims  — 
those  maxims  which  many  boys  have  thought 
may  do  well  enough  for  copybook  texts  or 
as  subjects  for  graduating  essays,  but  to 
which  they  have  attributed  little  practical 
importance  as  foundation  stones  of  business 
success.  I  believe  that  successful  business 
men  are  of  one  accord  in  saying  that  up- 
right, sturdy,  trustworthy  character  is,  more 
than  anything  else  —  indeed,  more  than 
everything  else  —  the  foundation  of  worldly 
success. 

If  that  is  true  there  can  be  no  more  prac- 
tical advice  than  that  the  young  business 
man  should  lead  his  reading  along  lines 
which  will  be  helpful  in  character-building. 
One  need  hardly  make  a  catalogue  of  books 

84 


The  Business  Man's  Readvng 

of  this  sort.  Different  minds  will  gather 
inspiration  from  various  sources.  The  pre- 
cepts of  the  Bible,  of  course,  every  one  will 
accept  as  the  very  best  for  such  purpose. 
Emerson,  Marcus  Aurelius,  Franklin  —  the 
authors  are  endless,  but  they  will  be  better 
selected  by  the  reader  than  by  any  one  else 
for  him. 

One  never  can  tell  what  particular  bit  of 
wisdom  may  get  its  grip  on  a  young  man's 
mind  and  have  profound  influence  in  shaping 
his  character  and  his  business  success.  I 
recollect,  when  I  was  an  apprentice-boy,  that 
I  got  hold  of  an  old  file  of  some  Scotch  en- 
gineering magazine,  and  I  read  there  some 
homely  advice  as  to  the  value  of  character 
in  the  machine  shop.  The  writer  pointed  out 
the  advantage  of  a  boy  so  conducting  him- 
self that  his  foreman  should  have  confidence 
in  his  character;  such  confidence  that,  when 
something  went  wrong,  when  there  was  a 
delinquent  somewhere  to  be  discovered,  the 
foreman's  mind  would  at  once  set  this  boy 
aside  with  a  secure  feeling  that  suspicion 
need  not  be  directed  against  him.  That  sim- 
ple bit  of  good  advice  happened  to  make  so 
much  of  an  impression  on  my  mind  that  I 
have  no  doubt  it  shaped  a  good  many  actions 
and  was  undoubtedly  of  real  practical  value 
in  securing  advancement. 

Along  with  reading  that  is  useful  in  char- 
ts 


Business  and  Education 

acter-building  there  should  go  reading  that 
will  create  high  motives  and  ideals,  for  high 
motives  and  ideals  are  of  much  more  prac- 
tical value  in  shaping  a  successful  career  than 
a  good  many  young  men  believe.  The  read- 
ing of  well-written  biographies  will,  perhaps, 
be  the  most  useful  in  that  connection,  so 
many  of  them  point  to  the  possibilities  of 
growth  from  humble  beginnings,  and  show 
the  force  there  is  in  singleness  of  purpose 
and  in  devotion  to  some  clear  aim.  One  will 
not  read  many  biographies  of  successful  men 
without  being  struck  with  the  similarity  of 
the  underlying  reasons  for  success. 
y  If  character  is  the  first  requisite  of  a  suc- 
cessful business  career,  perhaps  the  second 
may  be  said  to  be  a  keen  knowledge  of  one's 
fellow-men  and  a  clear  understanding  of  the 
mainsprings  of  human  action.  Experience 
i;i  life  gives  us  that,  and  it  is  out  of  that  that 
the  shrewdness  of  the  experienced  business 
man  is  built.  Much  knowledge  of  this  sort 
can  be  had  from  reading.  Many  of  the 
Bible  stories,  read  purely  as  literature,  will 
help  to-day,  as  they  have  helped  for  genera- 
tions, in  forming  accurate  judgments  of  men. 
It  is  in  this  direction  that  there  is  real,  prac- 
tical value  in  novel  reading.  Novels  which 
give  correct  pictures  of  life  and  clear  analy- 
sis of  human  character  will,  if  rightly  read, 
add  almost  veritable  living  people  to  one's 
86 


The  Business  Man's  Reading 

list  of  acquaintances.  That  means  a  widen- 
ing of  one's  experience.  Dickens,  Thack- 
eray, Howells,  George  EHot,  Jane  Austen, 
Mrs.  Humphry  Ward,  have  all  created  char- 
acters that  are  as  real  as  living  people.  The 
reader  who  has  added  those  characters  to 
his  acquaintance  has  added  to  his  knowledge 
of  human  nature.  To  read  carefully  a  novel 
written  by  a  master-hand  means  a  distinct 
broadening  of  one's  knowledge  of  human 
motives. 

One  of  the  absolute  essentials  of  a  busi- 
ness man's  reading  is  the  newspaper.  Prob- 
ably most  people  would  say  that  to  the  busi- 
ness man  it  is  the  most  important  source  of 
information,  and  some  might  say  that  it 
contains  all  that  a  business  man  needs  to 
read.  For  my  part,  I  am  very  far  from  at- 
taching to  the  newspaper  the  importance 
which  it  would  seem  to  merit  if  we  should 
judge  by  the  relative  amount  of  time  which 
the  average  business  man  gives  to  it.  There 
are  distinctly  bad  results  that  come  from  ex- 
cessive newspaper  reading.  One  is  the  great 
waste  of  time  in  reading  unimportant  and 
ephemeral  news.  In  the  making  up  of  the 
morning  daily  paper  the  perspective  as  to 
the  importance  of  things  must  be  altogether 
distorted  by  the  necessity  for  putting  high 
value  upon  the  latest  incident.  There  is  still 
worse  distortion  in  those  papers  which  have 

87 


Business  and  Education 

many  editions  each  day.  The  trivial  thing 
that  happens  an  hour  before  the  paper  goes 
to  press,  and  in  the  account  of  which  a  paper 
may  hope  to  "  scoop  "  its  rival,  will,  in  the 
position  which  the  editor  naturally  gives  it, 
far  outweigh  the  really  important  event  which 
happened  twenty-four  hours  before.  Any 
business  man  who  has  received  his  bundle  of 
home  papers  in  a  foreign  city  knows  how 
quickly  he  can  go  through  them  when  the 
dates  are  a  fortnight  old,  and  how  little  he 
finds  in  them  of  real  importance. 

As  to  business  subjects,  I  have  had  oppor- 
tunity to  know  something  of  newspaper 
writing  from  the  point  of  view  both  of 
the  newspaper  desk  and  the  business  man's 
desk.  I  appreciate  the  obstacles  that  are  in 
the  way  of  accurate  newspaper  work,  because 
I  have  labored  under  them  :  the  necessity  for 
haste,  the  impossibility  of  obtaining  com- 
plete data,  the  desire  for  sensational  pres- 
entation in  a  form  that  will  interest  a  large 
reading  public,  the  unavoidable  difficulty  of 
handling  subjects  with  which  the  writer  must 
at  times  have  little  familiarity;  and  on  the 
other  side  I  have  seen  something  of  the  in- 
accuracies in  newspaper  work  that  are  at 
once  recognized  by  the  business  man  who 
knows  the  facts;  the  lack  of  value  which 
much  serious  newspaper  writing  of  this  na- 
ture really  possesses;  to  say  nothing  of  the 
88 


The  Business  Mart's  Reading 

sensational  journalism  where  accuracy  is 
entirely  subordinated  to  startling  presenta- 
tion. Such  knowledge  as  I  have,  gathered 
both  inside  and  outside  the  newspaper  office, 
leads  me  to  place  a  good  deal  of  stress  upon 
the  suggestion  that  the  young  business  man 
can  waste  a  great  deal  of  time  on  the  daily 
newspaper. 

Of  course,  the  daily  newspaper  must  be 
read,  but  I  believe  the  less  time  there  is  put 
upon  it,  and  the  more  time  there  is  left  for 
better-prepared  writing,  the  greater  will  be 
the  gain.  If  the  young  business  man's  in- 
terests are  broad  I  think  he  can  with  much 
profit  read  one  foreign  newspaper:  such  a 
paper  as  the  London  Times  or  the  Standard. 
I  have  been  greatly  impressed  with  the  men 
who  are  the  foreign  correspondents  of  those 
two  great  English  newspapers.  The  regu- 
lar correspondents  of  the  Times  in  at  least 
four  of  the  great  European  capitals  —  Paris, 
Berlin,  Vienna,  and  St.  Petersburg  —  are 
men  who  have  held  their  important  positions 
for  at  least  twenty-five  years.  They  are  bet- 
ter trained  in  European  politics  than  the 
average  diplomat  accredited  to  those  courts, 
their  sources  of  information  are  of  a  superior 
character,  and  the  reviews  which  they  write 
of  political  and  commercial  conditions  are 
extremely  valuable.  If  the  business  man 
reads  a  foreign  language,  such  a  paper  as 
89 


Business  and  Education 

the  Frankfurter  Zeitung  is  the  highest  type 
of  a  business  newspaper,  and  can  be  read 
with  great  profit  by  any  one  who  wishes  to 
keep  thoroughly  abreast  of  the  currents  of 
European  commercial  life.  In  this  country 
we  have  two  or  three  dailies  devoted  ex- 
clusively to  business  interests  —  papers  like 
the  New  York  Commercial  and  the  Journal 
of  Commerce,  and  they  cover  remarkably 
well  the  commercial  and  industrial  field. 

I  believe,  however,  that  one  can  keep 
abreast  of  current  events  much  more  ac- 
curately if  he  gives  comparatively  little  time 
to  the  daily  paper  and  a  great  deal  of  time 
to  the  weekly  review.  Such  journals  handle 
current  affairs  with  dignity,  keen  judgment, 
and  much  greater  accuracy  than  is  to  be 
found  in  the  hurriedly  prepared  articles  of 
the  average  daily.  If  such  weeklies  are  sup- 
plemented by  monthly  magazines  and  other 
publications  which  secure  articles  on  sub- 
jects of  the  most  living  interest,  written  by 
men  well  qualified  to  write  them,  and  cover- 
ing most  of  the  phases  of  commercial,  finan- 
cial and  industrial  development,  a  knowledge 
of  current  affairs  will  be  gained  incomparably 
more  accurate  than  would  result  from  the 
reading  of  daily  newspapers. 

Some  of  the  technical  weeklies,  of  which 
the  Financial  Chronicle  in  this  country  and 
the  Economist  and  the  Statist  in  England 
90 


The  Business  Man's  Reading 

are  the  highest  examples,  cover  the  financial 
field  in  a  way  that  leaves  little  to  be  desired. 

Specific  suggestions  as  to  what  one  should 
read  are  of  importance,  but  I  believe  of  quite 
as  great  importance  is  some  advice  on  how 
one  should  read.  It  is  pleasant  to  drift  about 
in  a  boat  with  oars  gently  lapping  the  water 
now  and  then  as  one  feels  lazily  inclined  to 
pull  them;  it  is  quite  another  thing  to  sit 
in  an  eight-oared  shell,  under  the  eye  of  an 
expert  trainer,  and  pull  over  a  four-mile 
stretch,  making  every  stroke  and  every 
pound  of  weight  count  for  its  utmost.  The 
indolent  attitude  of  mind  with  which  many 
people  read  headlines  or  turn  pages  bears  a 
good  deal  the  same  relation  to  attentive  read- 
ing that  idle  drifting  in  a  rowboat  bears  to 
the  hard  exercise  and  full  physical  develop- 
ment that  come  with  good  work  in  a  good 
crew.  About  the  best  one  can  say  of  time 
spent  in  indolent  reading,  leaving  as  it  does 
but  the  haziest  of  mental  impressions,  is  that 
the  reader  has  been  saved  from  spending  his 
time  in  something  worse  than  idleness. 

I  believe  that  how  to  read  is  really  more 
important  than  what  to  read,  because  good 
method  in  reading  makes  good  selection  in- 
evitable. Loose  writing,  inaccuracy  of  state- 
ment, untruthful  delineation  of  character, 
will  none  of  them  stand  before  the  careful 
analytical   reader.      If  he   is   reading  with 

91 


Business  and  Education 

right  method  he  will  waste  little  time  on  poor 
selections. 

If  you  are  in  doubt  as  to  whether  you  are 
getting"  the  most  out  of  your  reading  ask 
yourself  how  much  you  remember  of  the 
last  thing  you  read.  If  it  was  a  novel,  do 
you  clearly  recollect  the  names  of  all  the  im- 
portant characters?  One  of  the  best  attain- 
ments of  a  business  man  is  a  clean-cut  mem- 
ory for  the  names  and  characteristics  of  the 
men  with  whom  he  comes  in  contact. 

A  business  man  can  afford  to  give  up  a 
little  of  his  time  to  current  scientific  reading, 
to  keeping  his  high-school  natural  phil- 
osophy or  his  college  physics  up  to  date,  to 
keeping  in  touch  in  a  general  way  with 
scientific  discoveries  and  the  trend  of  modern 
research  —  in  a  superficial  way,  perhaps,  but 
still  to  a  degree  that  may  at  some  time  or 
another  in  one's  business  career  be  of  real 
practical  importance. 

All  these  suggestions  are  rather  general, 
and  may  seem  unsatisfactory  because  they 
lack  specificness.  What  the  young  man 
wants  to  know  is  how  he  should  specialize  his 
reading  so  as  to  make  it  of  distinct  advantage 
in  his  everyday  work.  Generally  speaking, 
he  should  read  along  lines  which  will  give 
him  knowledge  that  his  superiors  ought  to 
have,  and  this  will  mean  that  he  is  fitting 
himself  for  better  things.  If  his  career  is  in 
92 


The  Business  Man^s  Reading' 

mercantile  lines,  he  should  seek  the  fullest 
information  regarding  his  particular  line  of 
business.  The  shoe  salesman  who  will  spe- 
cialize his  reading  upon  leather  and  leather- 
working,  who  will  learn  about  the  different 
processes  of  tanning  and  the  different  meth- 
ods of  manufacture,  will  not  only  be  a  better 
judge  of  the  goods  he  is  handling  but  will 
be  better  able  to  sell  them.  The  bank  clerk 
who  will  master  the  history  of  the  develop- 
ment of  the  banking  system  may  not  see  the 
application  of  that  knowledge  to  his  daily 
task,  but  if  opportunity  sometime  knocks  at 
his  door  he  will  be  much  better  prepared  to 
accept  the  burden  of  greater  responsibilities 
and  wider  usefulness. 


93 


THE     AMERICAN     "  COMMERCIAL 
INVASION"    OF    EUROPE 

Scribner's  Magazine,  1902. 

I.    The  European  Point  of  View 

"  England  has  been  hard  hit  by  the  Trans- 
vaal War,  but  is  still  the  richest  country  in 
the  world ;  France  is  without  initiative,  satis- 
fied with  returns  on  past  achievements ;  Ger- 
many shows  the  greatest  energy  and  initia- 
tive in  Europe,  but  has  travelled  too  fast; 
America  has  an  unparalleled  combination  of 
natural  resources  and  initiative,  and  will  go 
on  to  greater  achievements." 

This  was  a  summing  up  of  national  quali- 
fications in  the  world's  industrial  struggle, 
by  the  Russian  Minister  of  Finance,  M.  de 
Witte. 

I  had  asked  M.  de  Witte  to  give  his  views 
of  the  relative  positions  of  the  great  nations 
in  the  world-wide  industrial  contest.  There 
is  no  man  whose  answer  to  such  a  question 
may  be  listened  to  with  more  interest.  Ser- 
gius  de  Witte  is  a  man  of  whom  we  have 
heard  much,  but  from  whom  we  have  heard 
94 


**  Commercial  Invasion  "  of  Europe 

little.  In  the  minds  of  many  he  is  Europe's 
foremost  statesman.  He  shapes  the  policies 
of  Europe's  mightiest  empire.  He  watches 
with  greatest  care  the  varying  financial  cur- 
rents, and  is  in  the  closest  touch  with  com- 
mercial and  industrial  tendencies. 

His  Excellency  was  in  his  private  office 
in  the  Finance  Ministry  in  St.  Petersburg 
seated  at  a  great  flat-topped  desk,  piled  high 
with  official  problems,  neatly  sorted  and 
tagged  ready  for  his  examination.  It  was 
Sunday,  but  he  had  been  hard  at  work  all 
the  morning.  While  I  was  with  him  I  heard 
him  make  appointments  as  late  as  eleven 
o'clock  that  night.  It  is  easy  to  see  why  he 
has  gained  the  reputation  for  being  the  hard- 
est worked  man  in  Europe.  Broad,  strong, 
forceful,  but  with  the  repose  and  atmosphere 
of  reserve  power  which  mark  most  great 
men,  his  personality  gave  added  interest  to 
his  reputation.  He  reached  for  a  fresh  cigar- 
ette, from  a  case  he  had  been  steadily  de- 
pleting, and  touched  it  to  an  odd  electrical 
contrivance  on  his  desk,  which  automatically 
lighted  it.  Then  he  leaned  back  reflectively 
and  spoke  with  a  freedom  in  refreshing  con- 
trast to  the  reserve  of  many  lesser  officials. 

"  England  is  still  the  richest  country  in 
the  world,"  he  said.  "  This  Transvaal 
trouble  has  had  marked  effect  on  the  finances 
of  that  country,  and  indirectly  has  affected 

95 


Business  and  Education 

the  finances  of  every  country  in  Europe.  If 
Mr.  Chamberlain  will  stop  here,  if  he  does 
not  put  the  burden  of  any  more  such  cam- 
paigns on  England,  she  may  be  able  to  main- 
tain her  pre-eminent  position.  Should  she 
have  too  many  Chamberlains  and  too  many 
Transvaal  campaigns  she  might  be  ruined. 
But  up  to  the  present  time  English  pre-emi- 
nence is  not  seriously  shaken.  The  nation  is 
still  in  the  strongest  financial  position  of  all 
the  great  powers,  and  may  reasonably  expect 
to  continue  there.  France  is  like  a  small 
rentier.  She  is  contented  with  a  modest  in- 
come; contented  to  sit  with  her  lap  filled 
with  securities,  representing  past  achieve- 
ments and  present  investments,  and  cut  off 
the  coupons.  France  is  not  looking  for  new 
industrial  fields ;  she  is  building  no  new  rail- 
roads; she  is  making  no  commercial  con- 
quests. France  is  satisfied  now  simply  to 
sit  down  at  home,  contented  to  reap  the  small 
rewards  that  are  naturally  hers.  While  those 
rewards  may  seem  small,  however,  they  be- 
come in  the  aggregate  great  enough  to  place 
her  in  the  forefront  financially.  Germany, 
in  her  natural  resources,  is  poorer  than  Eng- 
land or  France,  but  she  is  rich  in  initiative 
and  energy.  The  German  nation  offers  the 
most  striking  example  of  initiative  and  en- 
ergy that  can  be  found  in  Europe.  Indus- 
trially, she  has  made  astonishing  strides. 
96 


"  Commercial  Invasion  "  of  Europe 

But  along  many  lines  the  progress  has  been 
unnatural  and  too  rapid,  and  trouble  may 
come  of  that. 

"  America  is  already  one  of  the  richest 
countries  of  the  world;  perhaps,  in  natural 
resources,  quite  the  richest.  There  we  find 
not  only  remarkable  natural  richness,  but 
combined  with  that  wealth  the  most  pro- 
nounced initiative  met  with  anywhere.  With 
such  a  combination  the  country  is  bound  to 
make  the  very  greatest  progress.  It  will  go 
on  and  on,  and  will  be  greater  and  still 
greater.  America  is  especially  fortunate  in 
that  she  has  no  great  military  burden.  Mil- 
itarism is  the  nightmare  and  the  ruin  of 
every  European  finance  minister. 

"  The  industrial  crisis  which  you  find  here 
in  Russia  is  not  confined  to  this  country. 
You  will  find  it  more  or  less  pronounced  all 
over  Europe.  Many  enterprises  have  de- 
pended largely  upon  English  capital.  Eng- 
land's Transvaal  w^ar  has  forced  her  to  draw 
in  her  wealth,  and  that  contraction  has  had 
a  marked  effect  upon  the  industries  of  all 
Europe.  People  who  were  carrying  on  busi- 
ness with  the  aid,  directly  or  indirectly,  of 
English  loans,  have  been  forced  to  make 
other  financial  arrangements,  and  frequently 
have  been  compelled  to  curtail  their  opera- 
tions. That  reduction  of  credit  and  with- 
drawal of  capital  have  acted  and  reacted 
7  97 


Business  and  Education 

until  they  have  become  important  factors 
in  bringing  about  widespread  industrial 
depression. 

"  England  has  not  been  alone,  however, 
in  expending  large  amounts  of  capital  in 
military  campaigns.  The  powers  have  all 
spent  great  sums  in  the  last  year  in  the  mili- 
tary operations  in  China.  The  floating  of 
loans  in  that  connection  has  made  demands 
upon  capital  that  have  further  embarrassed 
industrial  affairs.  Here  in  Russia  we  have 
had,  in  addition  to  those  unfavorable  influ- 
ences, other  embarrassing  conditions.  The 
Government  has  been  building  less  railroad 
than  has  been  constructed  at  any  time  during 
the  last  ten  years.  As  the  Government  is 
the  chief  customer  for  railroad  supplies,  de- 
pression has  naturally  followed  in  all  indus- 
tries depending  upon  railroad  construction. 
Then  there  have  been  industrial  enterprises 
organized  here  on  a  not  too  sound  financial 
basis.  But  as  we  get  farther  away  from 
some  of  these  special  causes  of  depression,  I 
think  the  industrial  crisis  will  end." 

There  can  be  no  doubt  of  the  interest  of 
M.  de  Witte  in  the  subject  he  was  discussing. 
Russia's  need  for  capital  is  like  Sahara's 
thirst  for  water.  There  is  probably  no  man 
in  Europe  more  anxious  than  he  to  see  the 
whole  earth  smile  under  the  blessings  of 
peace,  the  particular  blessings  in  which  he  is 
98 


"  Commercial  Invasion  "  of  Europe 

interested  being  a  low  rate  of  interest  and  a 
market  hungry  for  bonds. 

I  met  M.  de  Witte,  as  I  met  all  the  other 
finance  ministers  of  Europe,  on  a  tour  which 
I  made  last  year  to  obtain  the  European  point 
of  view  regarding  America's  industrial  ex- 
pansion. The  European  view  of  the  com- 
petitive positions  which  the  great  nations 
occupy  in  the  struggle  for  international  trade 
development  is  just  now  a  matter  of  keen 
interest  to  the  people  of  the  United  States. 
As  an  officer  in  the  financial  department  of 
the  Government,  during  the  period  of  the 
most  extraordinary  development  in  the 
whole  history  of  our  foreign  trade  relations, 
I  was  especially  interested  in  this  subject. 
I  wanted  the  point  of  view  and  conclusions 
of  some  of  the  men  who  were  equally  in- 
terested observers,  but  who  were  looking  at 
the  development  from  without  rather  than 
from  within.  For  four  years  I  had  seen  at 
close  range  the  growth  of  a  favorable  trade 
balance  which  had  assumed  a  total  in  that 
brief  period  greater  than  had  been  the  net 
trade  balance  from  the  founding  of  the  Gov- 
ernment up  to  that  time.  That  was  a  phe- 
nomenon which  had  had  few  parallels  in  our 
economic  history,  and  the  desire  to  study  it 
from  the  European  point  of  view  led  me  to 
visit  nearly  all  the  countries  of  Europe.  I 
was  offered  rather  unusual  facilities  for  ob- 
99 


Business  and  Ediication 

taining  the  views  of  men  most  influential  in 
political  life  and  commercial  affairs.  The 
diplomatic  representatives  at  Washington 
introduced  me  to  the  finance  ministers  of 
their  home  governments,  and  through  the 
foreign  treasury  officers  I  was  able  to  meet 
the  heads  of  all  the  imperial  and  state  banks ; 
through  other  channels,  prominent  bank 
officers  and  industrial  leaders.  It  is  my  pur- 
pose to  give  some  of  the  observations  and 
deductions  which  resulted  from  this  tour. 

The  subject  I  discussed  with  these  dis- 
tinguished foreigners  is  one  regarding  which 
our  public  has  been  pretty  thoroughly  en- 
lightened in  the  last  five  years,  and  it  is  one 
of  which  the  European  public  has  heard  al- 
most as  much  in  the  English  and  Conti- 
nental newspapers,  but  from  quite  an  op- 
posite point  of  view.  When  the  amount  of 
our  sales  to  foreign  countries  passed  the 
$1,000,000,000  mark  in  1897,  ^^  began  to 
congratulate  ourselves  on  the  strides  we 
were  making  in  the  markets  of  the  world. 
The  record  was  followed  by  steadily  grow- 
ing totals,  until  now  we  have,  in  a  twelve- 
month, sent  to  other  nations  commodities  to 
the  value  of  $1,500,000,000.  The  meaning 
of  that  total  is  emphasized  if  we  look  back 
and  find  it  compares  with  an  average  during 
the  ten  years  ending  1896  of  $825,000,000. 

While  our  sales  to  foreign  countries  have 

TOO 


"  Commercial  Invasion  "  of  Europe 

grown  so  prodigiously,  the  other  side  of  our 
financial  account  during  these  last  five  or 
six  years  has  shown  no  proportionate  in- 
crease. We  have  bought  from  the  foreign- 
ers an  average  of  only  $800,000,000  a  year, 
and  that  total  has  shown  little  tendency  to 
expand.  It  was  this  fact,  this  mighty  de- 
velopment of  our  sales,  while  our  purchases 
were,  comparatively,  on  a  declining  scale, 
which  piled  up  in  half  a  dozen  years  a  fav- 
orable trade  balance  so  enormous  as  to  startle 
the  world.  In  the  last  six  years  we  have 
sold  in  merchandise,  produce,  and  manu- 
factures $2,000,000,000  more  than  we  have 
bought;  while  in  all  our  history,  from  the 
beginning  of  the  Government  up  to  six  years 
ago,  the  foreign  trade  balance  in  our  favor 
had  aggregated  a  net  total  of  only  $383,- 
000,000. 

The  significance  of  these  surprising  totals 
was  recognized  on  both  sides  of  the  Atlantic. 
An  analysis  of  them  brought  out  features 
more  important  than  the  vastness  of  the 
aggregate.  Heretofore  our  sales  had  been 
made  up  almost  wholly  of  foodstuffs  and 
raw  materials.  Europe  was  the  workshop. 
But  that  has  changed,  and  we  find,  year  after 
year,  an  astonishing  increase  in  our  exports 
of  manufactured  articles,  an  increase  that  in 
the  last  two  or  three  years  reached  totals 
which  gave  ample  basis  for  the  popular  talk 

lOI 


Business  and  Ediocation 

of  our  invasion  of  the  European  industrial 
fields.  Our  exports  of  manufactured  articles 
in  the  decade  prior  to  1897  averaged  $163,- 
000,000  annually.  In  1898  our  sales  of 
manufactured  articles  to  foreign  customers 
jumped  to  $290,000,000,  the  next  year  to 
$339.ooo^ooOj  the  next  to  $434,000,000. 

These  figures,  showing  a  steady  invasion 
by  our  manufacturers  of  foreign  industrial 
fields,  have  a  natural  corollary.  As  exports 
of  manufactures  increased,  our  imports  of 
the  handiwork  of  foreign  shops  showed  an 
even  more  rapid  decline.  Our  manufacturers 
were  not  only  invading  the  foreigner's  own 
markets,  meeting  him  at  his  threshold  with 
a  new  competition,  but  they  were  taking 
away  from  him  his  greatest  market  —  the 
United  States.  We  have  in  the  last  half- 
dozen  years  been  manufacturing  for  our- 
selves a  vast  amount  of  goods,  such  as  we 
have  been  accustomed  to  buy  abroad. 

One  can  turn  from  a  contemplation  of 
these  great  totals  to  an  examination  of  the 
records  made  in  recent  years  by  individual 
industries,  and  find  in  detail  facts  upon 
which  to  base  a  belief  that  the  United  States 
has  acquired,  or  is  acquiring,  supremacy  in 
the  world's  markets.  So  many  industries 
have  been  sending  rapidly  increasing  con- 
tributions to  swell  the  rising  tide  of  our 
foreign  commerce  that  it  is  difficult  to  tell 
102 


"  Commercial  Invasion  "  of  Europe 

any  detailed  story  of  American  commercial 
expansion  without  making  it  read  like  a  trade 
catalogue.  The  increase  in  our  exports  of 
manufactured  articles  can,  in  the  main,  be 
traced  to  advances  made  in  the  manufac- 
ture of  iron  and  steel,  and  to  the  display  of 
inventive  talent  in  the  making  of  machinery. 
The  development  of  our  grasp  on  the  world's 
markets  for  articles  manufactured  from  iron 
and  steel  has  been  no  surprise  to  those  who 
early  recognized  the  position  of  America  in 
respect  to  the  raw  materials  from  which 
those  articles  are  produced.  America  un- 
questionably possesses  advantages,  in  respect 
to  her  iron  ore  and  her  coal  mines,  far 
superior  to  those  of  any  other  country,  and, 
based  solidly  upon  that  superiority,  has  al- 
ready become  the  greatest  producer  of  iron 
and  steel  in  the  world. 

American  locomotives,  running  on  Amer- 
ican rails,  now  whistle  past  the  Pyramids 
and  across  the  long  Siberian  steppes.  They 
carry  the  Hindoo  pilgrims  from  all  parts  of 
their  empire  to  the  sacred  waters  of  the 
Ganges.  Three  years  ago  there  was  but  one 
American  locomotive  in  the  United  King- 
dom; to-day  there  is  not  a  road  of  impor- 
tance there  on  which  trains  are  not  being 
pulled  by  American  engines.  The  American 
locomotive  has  successfully  invaded  France. 
The  Manchurian  Railway,  which  is  the 
103 


Busi/ness  and  Education 

real  beginning  of  oriental  railway-building, 
bought  all  its  rails  and  rolling-stock  in  the 
United  States.  American  bridges  span 
rivers  on  every  continent.  American  cranes 
are  swinging  over  many  foreign  moles. 
Wherever  there  are  extensive  harvests 
there  may  be  found  American  machinery 
to  gather  the  grain.  In  every  great  market 
of  the  world  tools  can  have  no  better  rec- 
ommendation than  the  mark  "  Made  in 
America." 

We  have  long  held  supremacy  as, a  pro- 
ducer of  cotton.  We  are  now  gaining  su- 
premacy as  makers  of  cloths.  American 
cottons  are  finding  their  way  into  the  mar- 
kets of  every  country.  They  can  be  found 
in  Manchester,  as  well  as  on  the  shores  of 
Africa  and  in  the  native  shops  of  the  Orient. 
Bread  is  baked  in  Palestine  from  flour  made 
in  Minneapolis.  American  windmills  are 
working  east  of  the  Jordan  and  in  the  land 
of  Bashan.  Phonographs  are  making  a  con- 
quest of  all  tongues.  The  Chrysanthemum 
banner  of  Japan  floats  from  the  palace  of  the 
Mikado  on  a  flag-staff  cut  from  a  Washing- 
ton forest,  as  does  the  banner  of  St.  George 
from  Windsor  Castle.  The  American  type- 
setting machines  are  used  by  foreign  news- 
papers, and  our  cash-registers  keep  accounts 
for  scores  of  nations.  America  makes 
sewing-machines  for  the  world.  Our  bi- 
104 


"  Commercial  Invasion  "  of  Europe 

cycles  are  standards  of  excellence  every- 
where. Our  typewriters  are  winning  their 
way  wherever  a  written  language  is  used. 
In  all  kinds  of  electrical  appliances  we  have 
become  the  foremost  producer.  In  many 
European  cities  American  dynamos  light 
streets  and  operate  railways.  Much  of  the 
machinery  that  is  to  electrify  London  tram 
lines  is  now  being  built  in  Pittsburg.  The 
American  shoe  has  captured  the  favor  of  all 
Europe,  and  the  foreign  makers  are  hasten- 
ing to  import  our  machinery  that  they  may 
compete  with  our  makers.  In  the  Far  East, 
in  the  capital  of  Korea,  the  Hermit  Nation, 
there  was  recently  inaugurated,  with  noisy 
music  and  flying  banners,  an  electric  railway, 
built  of  American  material,  by  a  San  Fran- 
cisco engineer,  and  now  it  is  operated  by 
American  motormen. 

One  might  go  on  without  end,  telling  in 
detail  the  story  of  American  industrial 
growth  and  commercial  expansion.  In  the 
list  of  our  triumphs  we  would  find  that 
American  exports  have  not  been  confined  to 
specialties  nor  limited  as  to  markets.  We 
have  been  successfully  meeting  competition 
everywhere.  America  has  sent  coals  to 
Newcastle,  cotton  goods  to  Manchester, 
cutlery  to  Sheflield,  potatoes  to  Ireland, 
champagnes  to  France,  watches  to  Switzer- 
land, and  "  Rhine  wine  "  to  Germany. 

105 


Business  and  Education 

Our  public  has  generally  looked  upon  the 
development  of  our  foreign  trade  as  only 
one  of  the  incidents  in  the  remarkable  period 
of  prosperity  which  we  have  been  enjoying, 
and  has  not,  perhaps,  clearly  analyzed  its 
full  significance.  The  European,  I  found, 
had  come  nearer  to  a  real  understanding  of 
the  situation. 

A  distinguished  Berlin  economist  outlined 
an  idea  which  seemed  to  me  interesting. 
QTwo  or  three  generations  ago,"  he  said, 
there  were  families  in  America  living  a  life 
of  almost  complete  industrial  independence. 
Not  only  was  all  the  necessary  food  raised, 
but  within  the  household  there  were  spinning 
and  weaving  and  the  application  of  all  neces- 
sary trades.  The  invention  of  machinery, 
the  development  of  factory  life,  the  special- 
ization of  industry,  made  such  independence 
impossible.  That  which  happened  to  the 
family  a  hundred  years  ago  has  happened 
now  to  the  nation.  Specialization  has  gone 
on,  and  concentration,  combinations,  and 
trusts  have  made  it  as  impossible  for  the 
small  manufacturer  to  compete  with  the 
great  as  it  was  for  the  hand-loom  and  the 
spinning-wheel  to  compete  with  the  factory. 
The  perfect  and  instant  communication  be- 
tween distant  parts  of  the  world,  the  cheap- 
ening of  transportation,  the  wider  knowl- 
edge of  every  country,  its  products  and  its 
io6 


"  Commercial  Invasion  "  of  Europe 

needs,  have  brought  about  an  interdepend- 
ence of  nations  that  is  now  ahnost  as  great 
as  the  dependence  of  one  class  of  industrial 
workers  on  another.  This  national  depend- 
ence, this  necessity  of  every  country  to  more 
and  more  largely  buy  and  sell  in  foreign 
markets,  is  forcing  every  nation,  whether  it 
wills  or  not,  into  participation  in  an  inter- 
national industrial  struggle.  That  is  the 
keynote  of  the  new  century.'  Whoever  will 
forecast  the  future  of  nationS^can  now  make 
no  more  useful  study  than  an  examination 
of  their  comparative  industrial  equipment. 

"  History  is  becoming  more  and  more  the 
story  of  industrial  development,"  he  con- 
tinued. "  The  strength  of  a  nation  becomes 
more  nearly  measured  by  its  wealth,  its  im- 
portance in  the  world's  progress,  by  its  rela- 
tive commercial  position.  History  will  more 
and  more  be  written  in  ledgers  and  balance- 
sheets,  in  trade  statistics,  and  in  the  figures 
which  show  the  results  of  industrial  con- 
quests or  defeats.  Modern  iron-clads  and 
smokeless  powder  have  largely  taken  out  of 
warfare  the  element  of  personal  bravery, 
and  have  substituted  technical  skill  and  exec- 
utive ability.  Many  of  the  same  qualities 
which  win  great  industrial  battles  are  to-day 
potent  in  deciding  the  results  of  military 
campaigns.  Commercialism  in  its  highest 
sense  has  been  the  real  object  back  of  half 
107 


Business  and  Education 

the  military  movements  of  the  last  decade. 
It  may  all  seem  very  sordid  and  unromantic, 
but  I  believe  that  a  study  of  the  comparative 
price-currents  of  nations,  an  analysis  of 
trade  balances,  an  understanding  of  the 
statistics  of  production  and  consumption, 
will  give  the  data  which  are  now  needed  in 
making  a  forecast  of  a  nation's  history." 

There  are  two  phases  to  the  significance 
of  the  American  grasp  of  the  world's  mar- 
kets. The  obvious  phase  is  the  development 
of  our  own  industries  which  must  follow 
such  a  conquest.  If  our  factories  are  to  be 
great  enough  to  supply  our  own  wants  and 
in  addition  turn  out  a  surplus  so  large  in 
volume  and  so  low  in  price  as  to  become  one 
of  the  most  important  factors  in  the  world's 
markets,  we  can  count  on  an  industrial 
growth  of  which  we  have  heretofore  hardly 
dreamed. 

There  is  another  phase  to  our  conquest  of 
foreign  markets,  however,  and  that  is  its 
effect  upon  the  other  nations  of  the  world. 
If  a  much  larger  share  of  the  world's  manu- 
facturing is  to  be  done  in  America,  it  means 
a  lesser  share  will  be  done  elsewhere.  The 
pictures  which  some  enthusiastic  observers 
of  our  foreign  trade  delight  to  draw,  of  a 
time  when  our  exports  have  so  increased  and 
our  imports  so  diminished,  that  we  will  not 
only  make  everything  we  want  for  ourselves, 
1 08 


"  Commercial  Invasion  "  of  Europe 

but  a  very  large  part  of  what  the  world 
wants  besides,  is  a  picture  which  ofifers 
neither  a  probable  forecast  nor  a  desirable 
result.  Naturally  we  cannot  go  on  selling 
to  the  world  a  great  surplus  of  food  products 
and  manufactured  articles  without  buying 
from  the  world  in  return.  Statistics  indi- 
cate that  we  have  for  the  last  two  or  three 
years  been  sending  Europe  annually  some- 
thing like  $600,000,000  more  than  we  have 
been  buying.  Europe  has  not  been  paying 
for  this  in  gold.  During  the  six  years  in 
which  we  built  up  a  surplus  foreign  trade 
balance  of  $2,744,000,000,  we  have  received 
from  the  rest  of  the  world  a  net  balance  in 
gold  of  only  $132,000,000. 

One  of  the  most  unanswerable  of  financial 
conundrums  is  how  the  world  has  settled  its 
debt  to  us  in  the  past  and  is  to  settle  it  in 
the  future.  If  these  statistics  of  our  foreign 
trade  are  to  be  depended  upon,  it  would  seem 
as  if  we  had  placed  the  world  in  our  debt  in 
the  last  six  years  to  such  an  extent  that  we 
ought  to  be  about  ready  to  foreclose  our  lien. 
As  a  matter  of  fact  international  finances 
do  not  show  that  we  have  any  unusual  com- 
mand in  the  world's  money  markets;  our 
bankers  have  no  extraordinary  credits  with 
their  foreign  correspondents.  There  seems 
to  be  no  vast  accumulation  of  funds  upon 
which  we  can  draw  at  will,  nor  is  there  other 
109 


Business  and  Education 

evidence  that  any  large  part  of  this  balance 
is  still  unsettled. 

The  question  of  how  a  $600,000,000  an- 
nual trade  balance  is  to  be  settled  has  been 
a  rather  interesting  puzzle  to  our  financiers ; 
to  European  finance  ministers  and  bankers, 
to  manufacturers  and  workmen,  it  is  a  sub- 
ject of  the  most  intense  and  immediate 
interest. 

The  answer  as  to  how  that  trade  balance 
has  so  far  been  settled  requires  a  good  deal 
of  explanation  which  must  be  based  on  very 
unsatisfactory  data.  The  prediction  as  to 
how  it  is  to  be  settled  in  the  future  leads  to 
most  interesting  speculation  regarding  finan- 
cial conditions. 

In  the  first  place  the  problem  is  not  so 
difficult  as  it  looks  on  its  face.  While  Gov- 
ernment reports  show  that  we  have  sold  to 
Europe  roundly  $600,000,000  a  year  more 
than  we  have  bought,  it  may  be  certain  that 
the  total  is  considerably  below  those  figures. 
I  have  been  close  enough  to  the  making  of 
Government  customs  statistics  to  know  some- 
thing of  the  difficulties.  No  fault  can  be 
found  with  the  thoroughness  of  the  work, 
but  it  is  quite  impossible  to  strike  any  accur- 
ate international  trade  balances  when  the 
figures  on  one  side  of  the  ledger  must  come 
from  importers  who  have  the  strongest  mo- 
tives for  undervaluing  imports  in  their  state- 
no 


"  Commercial  Invasion  '*  of  Europe 

ments.  I  would  hardly  like  to  make  a  guess 
regarding  the  average  percentage  of  under- 
valuation for  all  our  imports,  but  it  can,  at 
the  outset  of  the  consideration  of  this  prob- 
lem, be  set  down  as  a  very  large  amount. 
Then  there  are  items  of  great  importance  of 
which  our  customs  statistics  can  take  no 
note.  Our  European  tourists  are  generally 
supposed  to  spend  $100,000,000  a  year.  We 
pay  for  freights  to  the  owners  of  foreign 
steamship  lines  perhaps  $75,000,000  more. 
There  is  a  great  stream  made  up  of  number- 
less small  remittances,  sent  home  by  pros- 
perous immigrants.  And  lastly,  and  most 
important  of  all,  there  has  been  going  on  a 
repurchase  by  American  investors  of  our 
securities  which  have  been  held  in  foreign 
markets.  This,  in  the  aggregate  for  the  last 
ten  years,  assumes  enormous  proportions. 
The  best  of  statisticians  can  do  nothing  more 
than  guess  at  the  amount,  but  it  has  been 
great  enough,  in  the  main,  to  counterbalance 
the  excess  of  our  foreign  sales  over  our  pur- 
chases, after  the  totals  of  travellers'  ex- 
penses, ocean  freights,  and  the  home  contri- 
butions of  immigrants  have  been  deducted. 
This  return  of  our  securities  cannot  go  on 
forever;  indeed,  there  is  pretty  good  reason 
to  believe  it  cannot  go  on  much  longer,  for 
the  reason  that  there  are  now  few  American 
securities  held  in  Europe  to  return. 
Ill 


Business  and  Education 

It  is  the  practice  of  the  great  banks  of 
Europe,  particularly  of  Germany,  to  take 
charge  of  the  securities  owned  by  a  vast 
clientage  of  investors.  When  in  the  Impe- 
rial Reichsbank  and  in  the  Deutsche  Bank  in 
Berlin,  I  was  taken  into  great  vaults  whose 
walls  and  floors  were  covered  with  cases  like 
an  immense  library,  containing  stocks  and 
bonds  belonging  to  clients  of  the  banks  and 
held  there  for  the  collection  of  coupons  and 
for  safe-keeping.  In  each  of  the  banks  there 
were  securities  representing  some  2,000,000,- 
000  marks.  It  was  interesting  to  be  shown 
great  cases  of  empty  shelves  which  had  for- 
merly been  set  apart  for  American  securities, 
and  which  now  held  only  here  and  there 
scattered  packages.  This  was  the  visible 
evidence  of  what  an  examination  of  invest- 
ors' strong  boxes  would  show  in  all  those 
European  countries  which  have  in  years 
past  found  in  America  the  most  profitable 
field  for  investment. 

If  our  foreign  trade  is  to  continue  to  hold 
the  same  relation  between  imports  and  ex- 
ports that  has  been  ruling  for  the  last  few 
years  —  if  we  are  to  go  on  selling  Europe, 
say,  $600,000,000  a  year  more  than  we  buy 
—  there  will  be  then,  after  liberal  reductions 
for  travellers'  expenditures,  ocean  freights 
(an  item  which  the  development  of  Ameri- 
can shipping  may  materially  decrease),  and 
112 


"  Commercial  Invasion  "  of  Europe 

immigrant  remittances,  a  balance  due  us  of 
$300,000,000  or  $400,000,000  a  year.  How- 
is  that  balance  to  be  paid  ? 

That  question  is,  perhaps,  the  most  inter- 
esting of  any  that  can  be  propounded  to-day 
in  the  field  of  international  finance.  I  asked 
every  finance  minister  of  Europe  and  the 
head  of  every  imperial  bank  for  an  answer 
to  it.  I  found  it  a  question  over  which  they 
had  pondered  much  and  never  with  feelings 
of  satisfaction.  That  Europe  cannot  pay 
such  a  balance  in  gold  is  obvious ;  that  we 
would  not  desire  to  have  it  paid  in  that  way 
is  clear.  The  conclusion  which  I  found 
nearly  every  important  European  financier 
had  already  reached  was  that  America  will 
sooner  or  later  enter  the  European  security 
markets ;  that  the  tables  in  international  in- 
vestments are  to  be  completely  turned ;  that 
we  are  to  hear  no  more  of  the  English  or 
the  German  syndicate  making  investments  in 
America,  but  rather  of  the  American  syndi- 
cate becoming  a  most  important  factor  in  the 
foreign  investment  field. 

The  low  interest  rates  which  for  the  most 
part  have  been  ruling  in  America  for  several 
years  have  everywhere  attracted  attention. 
The  belief  is  growing  that  New  York  is  to 
become  the  lowest  money  market  in  the 
world.  There  has  been  particular  interest 
in  the  advances  made  in  the  market  price  of 

8  113 


Business  and  Ediocation 

investment  securities.  The  quotations  which 
have  been  made  for  high-grade  bonds  have 
been  the  wonder  of  Europe.  While  market 
quotations  have  shown  United  States  two 
per  cent  bonds  selhng  at  no,  the  three  per 
cent  bonds  of  the  Imperial  German  Empire 
were  quoted  at  88,  English  consols  bearing 
two  and  three-quarters  per  cent  sold  at  93, 
Russian  four  per  cent  gold  bonds  at  96,  and 
Italian  Government  issues  at  prices  netting 
the  investor  over  four  per  cent. 

These  comparisons  are  anything  but  pleas- 
ing to  European  treasury  officials.  They  are 
quick  to  see,  however,  that  such  a  compari- 
son is  not  entirely  fair.  Our  Government 
bonds  are  free  from  taxes,  and,  even  more 
important  than  that,  they  have  a  special  use 
and  value  to  national  banks.  A  national 
bank  may  issue  circulation  against  deposits 
of  these  bonds  with  the  United  States  Treas- 
ury, or  may  receive  public  deposits  if  it  puts 
up  Government  bonds  as  security,  and  so  the 
market  value  of  our  Government  issues,  and 
particularly  of  our  two  per  cent  bonds,  can- 
not be  taken  as  a  measure  of  the  investment 
return  which  capitalists  are  willing  to  take. 
It  is  a  fact,  however,  that  there  are  over 
$500,000,000  of  our  Government  bonds  not 
held  by  national  banks  to  secure  circulation 
or  as  a  basis  for  public  deposits.  Those 
$500,000,000  are  held  solely  for  investment, 
114 


"  Commercial  Irwasion  '*  of  Europe 

and  are  maintained  at  market  prices  which 
net  the  investor  less  than  one  and  three- 
quarters  per  cent,  quotations  which  certainly 
put  the  credit  of  this  Government  far  above 
that  enjoyed  by  any  other  nation. 

There  are  other  evidences  that  the  United 
States  is  becoming  the  best  market  in  the 
world  for  the  highest  grade  of  industrial 
securities.  First-class  railroad  bonds,  as,  for 
example,  those  of  the  Pennsylvania  or  New 
York  Central,  sell  on  a  basis  that  nets  the 
investor  as  low  a  rate  as  do  English  railroad 
bonds,  while  on  the  Continent  the  highest 
grade  of  corporate  securities  sells  at  prices  to 
realize  higher  rates  of  interest  to  the  investor 
than  do  our  best  securities. 

That  the  United  States  gives  promises  of 
reaching  a  position  of  industrial  supremacy 
in  the  world's  trade  is  acknowledged  to-day 
the  world  over.  Undoubtedly  we  have  been 
too  flamboyant  in  some  of  our  claims.  The 
industrial  world  as  yet  is  by  no  means  pros- 
trate at  our  feet.  We  have  before  us  a  long 
campaign  of  hard  work  and  intelligent  prose- 
cution of  every  advantage  which  we  have, 
before  we  reach  such  a  position  of  industrial 
supremacy  as  occasional  newspaper  writers 
on  both  sides  of  the  Atlantic  have  given  us 
credit  for.  That  we  have  the  foundation 
upon  which  to  build  such  industrial  suprem- 
acy, however,  cannot  be  doubted  by  any  one 

"5 


Business  and  Education 

who  is  familiar  with  the  resources  and  abil- 
ities shown  in  our  own  industrial  field,  and 
makes  intelligent  comparison  with  the  con- 
ditions that  obtain  abroad. 

It  ought  clearly  to  be  kept  in  mind  that 
the  road  to  the  commercial  domination  of 
the  world  is  not  a  clear  one  for  us,  and  that 
as  yet  we  are  a  long  way  from  the  end  of  it. 
Evidences  of  that  will  be  found  in  studying 
current  statistics  of  our  manufactured  ex- 
ports. The  rapid  increase  which  has  been 
going  on  for  a  number  of  years  has  halted, 
and  for  the  last  fiscal  year  reports  show  a 
decrease.  That  decrease  can  be  accounted 
for  by  the  fact  that  our  shipments  to  Porto 
Rico,  Hawaii,  and  the  Philippines  are  no 
longer  counted  foreign  exports,  but  it  is, 
nevertheless,  evident  that  a  halt  has  come  in 
the  triumphant  march  of  American  manu- 
factures toward  European  markets.  An  im- 
portant reason  for  this  is  in  the  very  force 
of  the  success  we  have  made.  There  have 
been  serious  inroads  made  in  the  prosperity 
of  many  foreign  manufactures  by  our  suc- 
cessful competition.  The  depression  has 
been  reflected  in  lower  wages  and  in  de- 
creased purchasing  power,  and  a  lower  level 
of  prices  which  has  reacted  on  us  in  common 
with  the  foreign  manufacturers. 

In  a  good  many  directions  we  have  much 
to  learn  in  regard  to  a  successful  prosecution 
ii6 


"  Commercial  Invasion  "  of  Europe 

of  foreign  trade.  The  Germans  could  give 
us  valuable  lessons.  They  are  strong  in  two 
particulars  —  strong  in  the  line  of  technical 
education,  though  perhaps  not  superior  to  us, 
and  strong  in  commercial  training  specially 
adapted  to  the  needs  of  their  representatives 
in  foreign  countries.  In  this  last  particular 
we  are  lamentably  weak.  We  do  not  learn 
languages  readily,  and  we  have  been  too 
busy  with  our  home  affairs  to  cultivate  what 
facility  we  have.  It  is  a  comparatively  diffi- 
cult thing  to  find  trained  business  men,  born 
in  America,  who  speak  fluently  two  or  more 
Continental  languages,^  and  it  follows  from 
that  difficulty  that  we  send  commercial  rep- 
resentatives to  Europe  who  are  under  the 
almost  hopeless  handicap  of  not  speaking 
the  language  of  a  country  in  which  they  wish 
to  do  business.  Were  it  not  for  the  coming 
universality  of  the  English  language,  the 
handicap  would  be  far  greater  than  it  is. 
Unfortunately  the  bad  equipment  of  many 
of  the  commercial  representatives  who  are 
sent  abroad  is  not  confined  to  their  lack  of 
knowledge  of  languages.  Frequently  they 
have  but  vague  ideas  of  the  commercial 
geography  of  Europe.  They  are  not  at  all 
clear  as  to  what  particular  sections  are  given 
over  to  this  form  of  manufacturing  or  that 
field  of  production.  More  than  half  the  fail- 
ures that  have  come  to  manufacturers  who 
117 


Business  and  Edtication 

have  tried  to  extend  their  foreign  business 
have  resulted  from  the  lack  of  qualifications 
in  the  representatives  they  sent  abroad. 

Another  condition  that  is  not  favorable 
to  our  development  is  one  that  is  being 
thought  of  a  good  deal  more  in  Europe 
than  at  home.  We  no  longer  are  occupying 
the  leading  position  in  scientific  investiga- 
tion having  special  commercial  application. 
Many  of  the  most  notable  discoveries  of  the 
last  few  years  in  commercial  chemistry,  elec- 
tricity, and  other  fields  of  scientific  work 
having  direct  relation  with  industry  have 
been  made  by  foreigriers.  The  X-ray  and 
the  wireless  telegraph  are  illustrations  which 
would  occur  to  every  one,  but  there  have 
been  numberless  important  discoveries  of 
great  value  in  industrial  operations  for 
which  we  are  obliged  to  pay  royalty  to 
foreign  inventors.  The  United  States  Gov- 
ernment is  to-day  paying  a  royalty  to  a 
German  inventor  for  the  use  in  the  mints 
of  a  method  of  refining  gold  by  electrolysis, 
a  method  which  proved  much  cheaper  than 
that  which  had  been  in  common  use  in  the 
Government  and  commercial  refineries  up  to 
within  a  year  or  two  ago.  Many  such  illus- 
trations could  be  given. 

One  of  our  particular  points  of  strength 
has  in  it  danger,  when  carried  too  far,  of 
being  an  element  of  decided  weakness.  We 
ii8 


"  Commercial  Invasion  "  of  Europe 

have  profited  greatly  by  our  genius  for 
specialization,  and  our  adoption  of  standard 
models  of  machines,  which  can  be  made  in 
great  quantities  at  extremely  low  cost.  In 
holding  closely  to  these  standard  designs, 
we  have  frequently  lost  sight  of  foreign 
prejudices.  Small  concessions  to  those  prej- 
udices might  have  meant  large  sales,  but 
our  manufacturers  have  declined  to  make 
them.  In  Moscow,  for  instance,  I  talked 
with  a  merchant  who  had  branches  all 
through  Siberia,  and  who  bought  large  con- 
signments of  ploughs  in  America.  The 
Russians  do  not  harness  their  horses  as  we 
do,  and  our  method  of  hitching  a  team  to 
a  plough  is  not  adapted  to  their  use.  This 
merchant  found  it  impossible,  however,  to 
get  our  plough  manufacturers  to  adopt  the 
slight  changes  which  he  suggested,  even 
when  his  orders  were  for  very  large  quan- 
tities, and  he  had  to  have  made  in  Germany 
the  type  of  clevis  which  his  customers  de- 
manded and  attach  it  to  his  importations 
of  American  ploughs. 

The  most  important  of  all  obstacles  that 
the  development  of  our  foreign  trade  is 
likely  to  encounter  is  the  same  one  which 
has  proved  the  most  dangerous  rock  in  the 
path  of  English  industry  —  the  growth  of 
a  spirit  in  trades-unions  which  attempts  to 
regulate  the  business  of  employers  in  other 
119 


Busmess  and  Education 

matters  than  those  relating  to  wages  and 
hours  of  labor.  I  believe  the  decline  of 
English  industry  can  be  attributed  to  the 
success  of  labor  organizations  in  restricting 
the  amount  of  work  a  man  may  be  per- 
mitted to  do,  more  than  to  any  other  single 
cause.  We  have  encountered  that  spirit  too 
frequently  in  our  own  labor  field,  and  it  is 
one  which,  if  successfully  persisted  in,  will 
cut  the  ground  of  advantage  from  under 
our  manufacturers  quicker  than  anything 
else  I  know  of. 

It  is  generally  understood  that  our  natural 
resources  are  in  many  important  particulars 
unparalleled.  We  patriotically  believe  that 
the  ability  of  the  average  American  work- 
man is  superior  to  that  of  his  competitor  in 
other  countries.  We  are  all  confident  that 
our  form  of  government  offers  the  solidest 
foundation  upon  which  to  build  national 
prosperity.  Our  industries  are  helped  rather 
than  hampered  by  our  system  of  federal  tax- 
ation, while  an  examination  of  the  incidence 
of  taxation  in  nearly  every  country  abroad 
shows  that  a  most  depressing  influence  on 
industries  is  exerted  by  the  national  tax- 
gatherers. 

There  are  other  facts  in  our  favor  not 
quite  so  generally  understood.  We  have, 
for  instance,  a  financial  system,  particularly 

I20 


"  Commercial  Invasion  "  of  Europe 

in  the  relation  of  our  banks  to  every-day 
business  transactions,  which  gives  us  as 
much  of  an  advantage  over  most  of  the 
Continental  countries  as  would  some  great 
labor-saving  machine.  The  American  busi- 
ness man  whose  operations  are  even  of  the 
most  modest  extent  is  certain  to  have  a  bank 
account.  He  pays  his  bills  with  checks  or 
drafts.  When  he  wishes  to  extend  his  opera- 
tions he  does  not  borrow  actual  currency, 
but  he  borrows  bank  credit.  In  all  his  trans- 
actions he  has  to  aid  him  the  most  fully 
developed  credit  system  to  be  found  any- 
where in  the  world  except  in  Great  Britain. 

It  is  almost  beyond  belief  how  little  de- 
velopment there  has  been  in  this  direction 
in  some  of  the  foreign  countries.  A  bank 
check  is  looked  upon  with  suspicion  in  Italy. 
Practically  no  small  tradesmen  would  take 
a  check,  and  none  of  them  keep  a  bank 
account.  It  was  still  more  surprising  to  me 
to  find  that  such  a  statement  would  be 
almost  literally  true  of  Paris  itself.  I  was 
studying  the  mechanism  of  the  Bank  of 
France  under  the  guidance  of  one  of  the 
officers.  ]  We  went  into  one  great  room  in 
the  old  building  in  which  there  were  200 
desks  enclosed  in  wire  cages,  all  empty  at 
the  moment.     I  asked  what  these  were  for. 

"  These  cages  are  for  our  city  collectors," 
I  was  told,  ^'  When  a  small  merchant  bor- 
121 


Business  and  Education 

rows  from  the  Bank  of  France,  he  does  not, 
as  with  you  in  America,  borrow  a  bank 
credit  and  have  his  loan  merely  added  to  his 
balance  on  the  books  of  the  bank.  With  us 
the  merchant,  when  he  makes  a  loan,  gets 
the  actual  money  and  takes  it  away.  He 
probably  has  no  bank  account  with  us. 
He  writes  no  checks.  When  the  loan  is 
due  he  does  not,  as  would  be  the  case  in 
your  banks,  come  in  and  pay  his  indebted- 
ness with  a  check;  instead  of  that  we  send 
a  collector  to  him,  and  that  collector  is  re- 
paid the  loan  in  actual  currency.  Two  hun- 
dred men  start  out  from  the  Bank  of  France 
every  morning  to  collect  matured  loans. 
Several  days  each  month  it  is  necessary  to 
send  out  400  men,  and  on  the  first  and  the 
fifteenth  of  each  month  600  collectors  go 
out." 

These  collectors  were  uniformed  men 
carrying  leather  pouches  in  which  they  have 
the  matured  notes  and  which  are  later  filled 
with  currency  as  the  collections  are  made 
from  the  bank's  borrowersTi 

I  stood  at  the  paying-teller's  desk  as  I 
went  farther  along  in  my  tour  of  the  Bank 
of  France.  As  I  halted  there  the  man  who 
happened  to  be  at  the  window  at  the  mo- 
ment presented  a  check  for  50,000  francs. 
The  money  was  counted  out  and  handed 
over  to  him,  stored  away  in  a  big  wallet, 
122 


"  Commercial  Irwa^ion  "  of  Europe 

and  he  passed  on.  I  asked  if  it  were  not 
unusual  for  a  man  to  draw  out  so  much 
currency,  and  was  told  that  it  was  not.  It 
was  but  another  illustration  of  how  unde- 
veloped is  the  banking  system  of  Conti- 
nental Europe  in  its  uses  by  the  general 
public. 

A  story  that  was  told  me  on  the  highest 
authority  in  Vienna  sounds  ludicrously  in- 
credible, but  it  is  true.  The  Austrian  Gov- 
ernment bought  a  telephone  line  from  an 
English  company.  There  was  a  payment 
of  i,C)CX),ooo  guldens  (about  $400,000)  to 
be  made  by  the  cabinet  officer  corresponding 
to  our  Secretary  of  the  Interior.  The  repre- 
sentative of  the  English  company  wished  to 
be  paid  by  merely  receiving  a  credit  at  the 
Austro-Hungarian  State  Bank.  The  minis- 
ter regretted  that  there  was  no  precedent  for 
such  a  method  and  insisted  on  sending  to 
the  bank,  which  is  the  government's  fiscal 
agent,  bringing  the  actual  money  to  his 
office,  and  counting  it  out  to  the  English- 
man, who  in  turn  took  it  back  to  the  same 
bank,  where  it  was  again  counted  and  put 
back  in  the  vault  from  which  it  had  been 
taken  an  hour  before. 

As  one  gets  farther  east  the  methods  of 
banking  become  more  primitive.  The  Rus- 
sian peasant  frequently  becomes  a  man  of 
very  considerable  property,  but  he  is  apt  to 
123 


Biisiness  and  Education 

cling  to  his  early  financial  method  of  bank- 
ing in  his  boots.  He  wears  boots  with  high 
felt  tops,  and  the  leg  of  one  is  the  receiving- 
teller's  cage,  and  the  top  of  the  other  is 
the  paying-teller's.  He  will  start  out  in  the 
morning  with  his  right  boot-leg  full  of 
money.  His  day's  payments  are  made  out 
of  that  boot,  and  his  receipts  are  deposited 
in  the  other.  At  night  he  checks  up  on  his 
day's  financial  operations  and  strikes  a 
balance. 

The  banking  methods  of  Continental  Eu- 
rope are  cumbersome  and  time-consuming, 
and  the  people  generally  have  learned  but 
the  first  lessons  in  the  uses  of  credit  ma- 
chinery. That  forms  a  handicap  upon  in- 
dustry that  is  just  as  real  as  that  caused 
by  their  persistence  in  using  out-of-date 
machines  and  methods  of  manufacture  which 
we  have  long  ago  abandoned  as  slow-going 
and  expensive. 

One  of  the  important  factors  in  the 
strength  of  our  industrial  position  is  the  un- 
questioned superiority  in  our  transportation 
system.  If  one  has  fresh  in  mind  the  picture 
of  our  luxurious  trains,  mammoth  engines, 
and,  more  important  still,  our  standard  fifty- 
ton  freight-cars,  it  makes  the  Europeans 
seem  like  amateurs  in  the  science  of  trans- 
portation when  we  see  their  toy  cars,  small 
locomotives,  and  generally  slow-going  ad- 
124 


"  Commercial  Invaskm  *'  of  Europe 

ministration.  If  one  looked  into  the  matter 
with  the  eye  of  an  expert,  studying  the  unit 
of  cost,  the  freight  charges  per  ton  per  mile, 
or  the  mileage  rate  for  passenger  service, 
and  made  comparative  statistics  of  the  ton- 
nage of  freight-trains  and  the  cost  of  moving 
them,  he  would  discover  a  startling  lack  of 
efficiency,  both  in  Great  Britain  and  on  the 
Continent.  Perhaps  it  is  not  quite  fair  to 
make  comparisons  of  the  average  cost  of 
freight  traffic  per  ton  per  mile  in  America 
and  in  Europe,  because  the  average  haul  is 
much  shorter  there,  and  terminal  expenses 
of  a  haul  are  practically  the  same  whatever 
its  length.  The  average  charge  per  ton  per 
mile  on  all  American  railroads  for  all  classes 
of  freight  is  now  less  than  three-quarters  of 
a  cent.  If  we  take  the  statistics  of  the  East- 
ern trunk  lines  alone,  that  figure  would  be 
cut  to  about  one-half  cent  per  ton  per  mile. 
It  compares  with  2.4  in  Great  Britain,  2.2  in 
France,  1.6  in  Germany,  and  2.4  in  Russia. 
One  of  the  most  remarkable  illustrations  of 
the  failure  of  European  managers  of  indus- 
tries to  keep  pace  with  the  times  is  to  be 
found  in  a  comparison  of  the  efficiency  of 
their  railroads  with  ours.  English  railroads 
charge  three  times  as  much  to  move  a  ton 
of  freight  as  it  can  be  moved  for  in  America. 
English  railroad  managers  have  failed  to 
grasp  the  economies  that  are  made  possible 
125 


Business  and  Edtication 

by  heavy  traffic,  by  the  use  of  engines  of 
enormous  capacity  and  freight-cars  that  will 
carry  fifty  tons.  But  if  the  English  railroads 
have  failed  to  keep  pace  with  ours,  what  can 
be  said  of  most  of  the  Continental  roads? 
Short  trains  with  pygmy  freight-cars,  each 
car  holding  only  eight  tons,  make  clear  to 
any  layman  the  handicap  which  high  trans- 
portation charges  have  laid  on  industry  all 
over  Europe. 

In  the  little  town  of  Abo,  in  Finland,  I  was 
waiting  one  day  for  a  steamer  to  go  to 
Stockholm.  In  strolling  about  the  town  I 
ran  across  another  American.  I  learned  that 
he  was  the  representative  of  a  great  engine 
manufactory,  and  that  he  had  been  covering 
Europe  from  Spain  to  Russia.  He  had  been 
able  to  sell  his  engines  in  competition  both 
with  the  domestic  manufacturers  and  with  the 
makers  in  Great  Britain  and  Germany,  who 
had  before  practically  controlled  the  trade. 
I  asked  him  to  analyze  for  me  the  condi- 
tions that  enabled  him  to  come  into  these 
markets  and  sell  in  successful  competition 
in  spite  of  customs  duties,  in  spite  of  4,000 
or  5,000  miles  of  transportation  charges,  and 
in  spite  of  the  fact  that  his  factory  paid 
workmen  average  wages  two  or  three  times 
as  large  as  were  paid  by  his  competitors. 

"  Our  success  in  coming  into  this  field," 
he  said,  "is  very  largely  due  to  what  in  our 
126 


"  Commercial  Invasion  "  of  Europe 

manufacturing  parlance  we  call  the  making 
of  '  standards/  We  believe  we  know  how 
to  make  a  type  of  engine  which  will  give 
the  maximum  efficiency  for  a  certain  class 
of  work.  We  develop  our  standard  type 
and  then  we  stick  to  it.  We  are  enabled  to 
manufacture  an  enormous  number  of  en- 
gines all  exactly  alike  because  we  have  in 
our  home  market  an  enormous  field.  The 
American  public  has  been  taught  that  a 
builder  of  engines  knows  better  how  to  de- 
sign an  engine  than  does  the  individual  who 
only  occasionally  buys  one.  Our  best  manu- 
facturers absolutely  refuse  to'vary  from  their 
standards.  In  making  a  great  number  of 
engines  exactly  alike  we  can  turn  out  work 
at  a  price  that  is  simply  beyond  the  possible 
competition  of  the  ordinary  European  maker. 
Our  labor-saving  machines  largely  compen- 
sate for  the  higher  wages  we  pay.  The  Eng- 
lish and  German  manufacturers  are  harassed 
by  consulting  mechanical  engineers.  A  man 
who  wants  to  buy  an  engine  employs  an  in- 
dependent consulting  engineer.  The  engi- 
neer invariably  feels  that  he  must  earn  his 
fee  by  suggesting  a  change.  If  a  dynamo  is 
adjusted  to  make  112  revolutions  a  minute 
he  wants  an  engine  built  that  will  turn  it  113. 
The  result  is  that  English  and  German  manu- 
facturers make  an  endless  number  of  types. 
What  is  more,  they  cannot  get  away  from 
127 


Business  and  Education 

the  thraldom  that  they  are  in,  and  adopt  our 
system  of  standard  types,  because  they  have 
not  the  great,  broad,  homogeneous  market 
which  America  offers  to  its  own  manufac- 
turers. I  doubt  if  our  manufacturers  appre- 
ciate the  great  advantage  which  they  have  in 
this  home  market,  where  the  inhabitants, 
from  the  Atlantic  to  the  Pacific,  are  very 
much  the  same  kind  of  people,  with  very 
much  the  same  needs  and  desires.  In  Europe 
every  manufacturer  has  a  sharply  circum- 
scribed field.  He  is  met  by  new  tariffs  and 
new  tongues  only  a  short  distance  from 
home  in  whatever  direction  he  goes.  The 
type  of  article  which  can  be  sold  in  one  dis- 
trict may  find  no  market  in  another  close  by? 
With  us  the  man  in  Los  Angeles  wears  just 
the  same  kind  of  hat  as  the  man  in  Bos- 
ton, and  the  people  through  all  that  stretch 
of  3,cx)0  miles  are  dressed  the  same,  and 
buy,  generally  speaking,  similar  commodities. 
This  broad  basis  of  our  own  unparalleled 
market,  which  permits  a  manufacturer  to 
successfully  work  out  a  standard  article,  and 
then  produce  an  enormous  quantity  of  that 
exact  type,  is  the  most  secure  basis  upon 
which  to  build  a  foreign  trade.  We  alone 
have  that  advantage.  No  European  manu- 
facturer can  successfully  follow  in  our  lead." 

When  M.  De  Witte  said  that  militarism 
128 


"  Commercial  Invasion  "  of  Europe 

is  the  nightmare  and  the  ruin  of  every 
finance  minister,  he  spoke  a  truth  that  has 
an  appHcation  to  this  question  of  industrial 
rivalry.  The  evidence  of  militarism  is  one 
of  the  most  obvious  things  in  Europe.  In 
Russia  one  is  never  out  of  sight  of  a  line 
of  brown-coated,  stolid-faced  soldiers.  A 
tremendously  effective  display  of  military 
strength  is  everywhere  encountered  in  Ger- 
many. One  is  impressed  by  the  cost  of 
the  brave  attempts  of  poor  Italy  to  keep  up 
military  appearances  in  the  company  of  first- 
class  powers,  a  company  to  which  she  has 
not  the  natural  right  to  aspire.  No  one  can 
see  this  universal  display  without  contrast- 
ing its  cost  and  the  burden  which  that  cost 
throws  on  industry,  with  the  comparative 
freedom  from  that  weight  in  the  United 
States. 

Europe  spends  annually  for  military  and 
naval  establishment  $1,380,000,000.  With 
our  army  on  something  of  a  war  footing, 
as  it  is  at  present,  we  have  only  spent 
in  the  last  year  for  the  army  and  navy 
$205,000,000. 

Marked  as  is  this  difference  of  cost,  it  by 
no  means  measures  the  real  weight  which 
militarism  puts  on  the  European  powers;  it 
is  not  alone  that  Europe  spends  $1,380,000,- 
000  a  year  to  maintain  the  military  establish- 
ment, but  very  much  more  important,  from 
9  129 


Business  and  Education 

the  industrial  standpoint,  is  the  fact  that 
Europe  takes  out  of  her  productive  capacity 
4,000,000  men.  These  milHons  are  just  in 
the  fulness  of  their  youth  and  would  be  a 
tremendous  factor  in  industrial  production. 
The  male  industrial  population  of  Europe, 
men  between  the  ages  of  twenty  and  sixty, 
may  be  estimated  at  about  100,000,000.  To 
withdraw  from  productive  industry  for  mili- 
tary purposes  4,000,000  men  means  a  loss  of 
four  per  cent,  and  that  is  in  addition  to  the 
taxes  necessary  to  raise  the  $1,380,000,000 
for  the  annual  maintenance  of  the  military 
establishments.  When  we  perceive  the  full 
weight  which  militarism  has  hung  upon  the 
neck  of  industry  in  Europe,  we  see  another 
enormous  handicap  which  is  acting  year  after 
year  in  our  favor. 

In  the  course  of  a  conversation  with  one 
of  the  most  eminent  of  European  financiers, 
a  man  who  has  added  the  distinction  of 
notable  public  service  to  a  business  career 
which  made  his  name  familiar  in  every  finan- 
cial centre,  I  said  that  one  of  the  things 
which  had  occurred  to  me  in  my  observation 
of  European  affairs,  after  seeing  the  tre- 
mendous effect  upon  England  herself  and 
through  her  upon  all  the  countries  of  Europe 
of  the  expenses  of  the  Transvaal  War,  was 
that  if  a  small  war  under  modern  conditions 
was  to  cost  so  much  as  the  Transvaal  War 
130 


"  Commercial  Invasion  *'  of  Europe 

had  cost,  and  was  to  produce  such  an  effect 
upon  industry  and  commercial  conditions 
throughout  Europe,  no  great  war  would  in 
the  future  be  possible. 

"  You  are  wrong,"  he  said. 

"  That  is  not  clear  to  me,"  I  replied. 
"  Let  us  take  Russia  for  illustration.  Sup- 
pose Russia  was  to  begin  a  great  war. 
Where  is  she  to  get  the  money?  " 

"  Let  me  tell  you  a  little  of  a  war  of  which 
I  know  something,"  he  said.  "  I  happen  to 
control  nearly  all  the  railways  of  Turkey. 
Turkey  had  a  war  with  Greece.  Now  let  us 
see  how  she  paid  the  expenses.  She  raised 
an  army;  she  paid  her  army  nothing.  She 
transported  that  army  of  60,000  men  from 
the  interior  of  Asia  Minor  to  the  Greek 
border.  How  did  she  do  that?  She  com- 
manded our  railroads  to  carry  them.  Did 
we  carry  them?  Yes.  Have  we  any  pay 
for  it?  No;  nor  will  we  ever  have.  So 
she  paid  nothing  for  the  transportation  of 
her  army.  Then  she  had  to  arm  it.  What 
did  she  do?  She  bought  arms  in  Germany. 
Has  she  paid  for  them  ?  No.  So  she  raised 
her  army,  transported  it,  and  armed  it.  The 
whole  cost  of  that  campaign,  in  fact,  was 
managed  without  any  real  expenditure  of 
money. 

"  So  it  would  be  with  Russia.  I  was  once 
in  the  interior  of  Persia.  I  met  there,  2,000 
131 


Bwsiness  and  Ediication 

miles  from  the  sea,  two  German  tramps. 
I  asked  them  where  they  were  going.  They 
said :  '  The  Pacific  Ocean  is  off  here  some- 
where, and  we  are  making  our  way  toward 
the  Pacific  Ocean.'  I  asked  them,  '  What 
can  you  do  ?  '  One  said,  '  I  can  play  a  trom- 
bone.' The  other  said :  '  I  can  weave  straw 
baskets.'  '  Well,'  I  said,  *  how  have  you  got 
here  ?  '  *  We  can  walk,  and  the  people  are 
good,'  was  the  answer. 

"  So  it  is  with  the  army.  They  can  walk, 
and  the  people  are  good.  If  the  people  are 
not  good,  the  army  gets  its  provisions  any 
way.  The  expenses  of  a  war  in  Russia,  so 
long  as  it  was  in  Russia,  would  be  to  that 
nation  very  small,  and  the  financial  situation 
is  not  a  commanding  condition  in  any  con- 
siderations of  peace  or  war." 

"  What  is  the  future  of  the  world  with 
respect  to  America?  "  I  asked.  "  If  Amer- 
ica is  to  go  on  in  anything  like  the  way  she 
has  been  going  in  the  last  three  or  four  years 
with  her  foreign  trade  —  if  America  is  to 
sell  to  Europe  $600,000,000  a  year  more 
than  she  buys — what  is  to  be  the  outcome?" 

"  Something  always  happens,  and  some- 
thing will  happen  here.  I  do  not  know  what 
it  is;  I  cannot  foresee  it.  America  so  far 
seems  to  be  making  no  mistake,  but  some- 
thing will  happen.  Things  cannot  go  on  as 
they  are  going.  It  may  be  that  it  is  your 
132 


"  Commercial  Irwasion  "  of  Europe 

colonial  policy.  At  present  there  are  4,000,- 
000  soldiers  in  Europe,  the  best  of  her  young 
manhood,  who  not  only  are  taken  away  from 
production,  but  are  paid  for  being  taken 
away  from  production,  and  Europe  is  paying 
six  milliards  a  year  to  support  them.  That 
six  milliards  does  not  measure  the  cost.  It  is 
that,  plus  the  loss  to  production,  which  ham- 
pers commercial  Europe,  and  it  is  there  that 
you  have  the  great  advantage.  But  what  of 
your  future  ?  We  are  glad  to  see  you  going 
into  the  Philippines.  We  will  welcome  the 
time  if  you  are  going  to  measure  strength 
with  us  as  a  military  power.  Commercially 
you  are  supreme,  but  if  it  comes  to  a  test  of 
military  strength,  if  you  are  going  to  weight 
yourselves  with  the  militarism  which  is  the 
burden  of  Europe,  then  we  can  see  some 
light." 

I  asked  if  the  tendency  in  Europe  is  in  the 
direction  of  a  reduction  of  military  forces. 
"  Not  at  all,"  he  said.  "  France  hates  Eng- 
land, and  England  hates  France;  Germany 
detests  France,  and  France  detests  Germany ; 
Russia  hates  Germany,  and  Germany  hates 
Russia.  There  it  is  all  around.  There  is  no 
hope  of  reduction.  It  is  impossible.  Eng- 
land has  hoped  to  come  to  some  understand- 
ing with  Russia.  I  spent  some  time  at  the 
home  of  Mr.  Chamberlain  not  long  ago,  and 
there  was  a  strong  hope  in  his  mind  that 
133 


Business  and  Edtocation 

England  could  come  to  a  better  understand- 
ing with  Russia.  But  it  is  impossible,  just 
as  it  is  impossible  for  France  and  Germany 
to  come  to  an  arrangement.  We  are  no 
longer  afraid  of  France.  We  beat  her  from 
a  military  standpoint.  We  have  beaten  her 
now  from  a  commercial  standpoint,  and 
there  is  nothing  else.  Commercially  we 
hold  a  pretty  strong  position  with  France. 
After  the  war  we  had  a  treaty  which  pro- 
vided that  we  should  be  equal  to  the  most 
favored  nation.  France  began  making  spe- 
cial treaties,  but  as  soon  as  she  concluded 
one  we  took  a  place  equally  favored,  and 
strengthened  our  commercial  position.  We 
have  beaten  her  commercially,  and  I  see 
nothing  to  fear  from  France." 

I  asked  what  he  thought  of  the  great  con- 
solidations of  America,  such  as  the  steel 
combinations. 

"  An  autocracy  is  good  or  bad  according 
to  the  autocrat.  If  he  is  a  good  autocrat  it 
is  the  very  best  thing  possible.  If  he  is  a 
bad  autocrat,  it  is  the  worst.  Who  is  going 
to  control  your  trusts?  That  is  the  whole 
question.  It  is  true  you  have  managed  your 
Standard  Oil  in  a  way  that  is  creditable,  and 
that  has  brought  satisfaction  to  the  country. 
The  Sugar  trust  has  been  in  a  measure  man- 
aged as  well.  But  what  assurance  have  we 
that  this  great  Steel  trust  is  to  be  managed  so 
134 


"  Commercial  Invasion  "  of  Europe 

well  ?  That  is  the  whole  problem.  It  is  the 
question  of  men.  Undoubtedly  it  makes  you 
a  much  more  formidable  competitor,  because 
it  consolidates  your  interests.  But  you  are 
a  young  nation.  You  are  a  young  people. 
You  are  young  in  this  business  of  consolida- 
tion. What  has  been  the  world's  history 
when  you  put  great  power  into  the  hands  of 
young  men  ?  It  has  sometimes  been  abused. 
We  shall  watch  with  great  interest  the  course 
with  you  in  this  enormous  combination." 

And  that  is  what  all  Europe  is  doing  — 
watching  with  the  keenest  interest  our  course 
as  it  affects  our  position  in  the  world's  in- 
dustrial contest. 


II.    Italy,  Austria,  Germany 

Industrially  it  is  no  longer  the  Old  World. 
It  is  New  Europe  and  Old  America!  It  is 
New  Europe,  a  land  of  undeveloped  possi- 
bilities, abounding  in  opportunity  for  keen 
captains  of  industry.  It  is  mature  America, 
the  exemplar  of  modern  industrial  methods, 
perfected  mechanical  ideas,  and  ripe  eco- 
nomic policy. 

This  conception  of  a  new  Europe,  looking 
toward  mature  America  for  the  best  illustra- 
tions of  industrial  development,  was  novel 
enough  when  I  first  encountered  it,  but  it 
135 


Business  and  Education 

becomes  familiar  as  one  goes  from  country 
to  country  and  sees  field  after  field  rich  in 
opportunities  for  the  introduction  of  better 
methods,  the  application  of  better  mechanical 
ideas,  and  the  planting  of  more  correct  eco- 
nomic policies.  It  was  in  Rome  that  I  first 
met  this  thought  of  a  new  Europe.  I  was 
told  that  Italy  was  but  thirty  years  old,  that 
the  present  economic  life  dates  back  only  to 
1870,  and  that  the  modern  Roman  is  to-day 
an  industrial  pioneer  in  a  virgin  country. 
Such  a  thought  applied  to  almost  the  oldest 
European  civilization  is  especially  striking, 
but  every  other  country  of  Europe  offers 
illustrations  of  the  truth  of  the  paradox. 
We  not  only  find  that  Italy  has  suddenly 
awakened  to  the  possibilities  of  conserving 
the  force  of  her  enormous  water-power,  and 
is  beginning  a  great  movement  to  turn  into 
electrical  energy  numberless  cascades  and 
rapids,  but  an  examination  of  the  industrial 
side  of  every  other  nation  shows  much  that 
is  still  unhewn  and  unwrought.  Austria  has 
just  formulated  a  legislative  plan  for  a  great 
network  of  canals  which  will  cost  hundreds 
of  millions  of  florins  and  revolutionize  the 
transportation  of  the  empire.  Germany, 
from  this  industrial  point  of  view,  is  a  pic- 
ture of  youth  —  new  factories  on  every 
hand,  new  development  everywhere,  and  the 
spirit  of  the  industrial  pioneer  in  all  the 
136 


"  Commercial  Invasion  "  of  Europe 

people.  England,  wedded  as  she  is  to  in- 
dustrial precedent,  turning  instinctively  from 
methods  that  mean  change,  holding  close  to 
the  ways  that  were  the  ways  of  the  fathers, 
presents  a  field  unploughed  when  looked  at 
from  the  point  of  view  of  the  opportunity 
offered  for  the  introduction  of  the  best  in- 
dustrial methods  and  the  most  economical 
mechanical  equipment.  France,  with  her 
satisfaction  over  her  minute  subdivision  of 
ownership  and  her  contentment  with  small 
things,  offers  virgin  fields  for  the  exploita- 
tion of  modern  ideas  of  specialization,  com- 
bination, and  community  of  interests.  Vast 
Russia,  enormous  in  extent  and  population, 
is  immaturity  itself,  new  industrially  beyond 
anything  America  has  known  for  two 
generations. 

When  we  see  that  Europe  is  an  industrial 
field,  still  undeveloped;  that  in  many  direc- 
tions the  methods  and  practices  current  in 
industrial  life  are  as  wasteful  and  expensive 
as  are  operations  in  some  new  country,  we 
perceive  at  once  that  such  a  condition  has 
two  important  relations  to  our  own  industrial 
life.  If  our  foreign  competitors  are  not 
making  the  most  of  their  opportunities,  their 
time,  and  their  labor,  gauged  by  our  stand- 
ards, it  means  that  they  are  under  a  handicap 
in  competition  with  our  industrial  output, 
and  so  long  as  our  methods  are  superior  to 
137 


Bv^iness  and  Education 

the  methods  in  vogue  in  Europe  we  may- 
look  for  continued  advantage  in  interna- 
tional competition. 

The  idea  of  an  undeveloped  Europe  is  of 
decided  interest  to  us,  however,  from  another 
point  of  view.  With  such  a  field  for  devel- 
opment as  we  have  had  at  home  we  have 
become  experts  in  seeing  new  opportunities, 
and  have  become  quick  to  disregard  prece- 
dent and  long-established  conditions,  and  to 
perceive  the  advantages  which  may  come 
from  new  combinations,  modern  equipment, 
and  specialized  work.  An  undeveloped  Eu- 
rope, therefore,  offers  a  field  in  which  this 
special  genius  of  ours  may  profitably  exploit 
some  of  the  same  industrial  methods  and 
policies  which  have  proven  so  successful  at 
home.  This  is  not  a  mere  theory.  There 
are  already  notable  illustrations  of  success  in 
exactly  that  sort  of  thing,  and  there  are 
promises  of  many  more  successes  to  come. 
Our  great  electrical  companies  have  estab- 
lished works  in  England,  France,  Germany, 
and  Russia.  There  are  tool-works  in  Ger- 
many equipped  with  complete  sets  of  Amer- 
ican models,  American  machines,  and 
Yankee  foremen.  Important  portions  of 
London  interurban  transportation  systems 
have  come  into  American  hands  and  are 
feeling  the  vivifying  influence  of  American 
ideas.  The  electric  street-railroads  and 
138 


"  Commercial  Irwasion  "  of  Europe 

lighting-plants  in  a  number  of  important 
cities  of  France  are  controlled  by  American 
interests,  and  the  transportation  system  of 
Paris  itself  is  a  field  which  is  tempting  close 
investigation  on  behalf  of  American  capital. 
Some  attention  has  heretofore  been  drawn 
to  the  extraordinary  balance  in  America's 
favor  which  the  last  half  dozen  years  of 
foreign  trade  has  built  up.  The  settlement 
by  Europe  of  these  annual  trade  balances  is 
a  problem  which  has  been  outlined,  and  at- 
tention has  been  called  to  the  opinion  of 
many  European  and  not  a  few  American 
financiers  that  ultimately  the  settlement  of 
this  trade  balance  must  be  effected  by  Amer- 
ica investing  in  European  interests  and 
securities.  A  few  years  ago  it  would  have 
sounded  absurd  to  have  talked  of  the  possi- 
bility of  American  capital  seeking  investment 
in  Europe.  The  idea  is  hardly  yet  so  fa- 
miliar as  to  make  it  seem  reasonable.  It  is 
hard  to  believe  that  America,  with  her  end- 
less opportunities,  unparalleled  richness  of 
natural  resources,  and  admitted  pre-eminence 
in  industrial  methods,  should  not  continue 
for  a  long  time  to  be  a  more  profitable 
field  for  the  investment  of  capital  than  can 
possibly  be  found  in  Europe.  For  us  the 
disadvantages  of  distance,  of  foreign  laws 
and  customs,  and  of  competition  with  great 
funds  of  accumulated  capital  have  heretofore 
139 


Bwsiness  and  Education 

seemed  to  preclude  any  possibility  of  our 
becoming  investors  across  the  Atlantic.  But 
this  annual  trade  balance  which  we  have  been 
piling  up  has  been  so  extraordinary  in  itself 
that  it  seems  likely  to  lead  to  other  unusual 
features;  and  among  those  it  now  seems 
easily  possible  that  we  shall  see  American 
capital  become  an  important  factor  in  Euro- 
pean fields. 

Naturally,  few  Americans  have  gone  to 
Europe  to  look  for  investment  opportunities. 
Travellers'  descriptions  have  been  endless, 
but  few  of  them  have  told  us  of  European 
conditions  from  an  American  investor's  point 
of  view.  We  have  in  times  past  had  a  good 
many  financiers  go  abroad  to  convince  Euro- 
pean capitalists  of  the  credit  and  good  pros- 
pects of  enterprises  that  we  were  developing 
at  home,  but  it  is  only  within  the  last  few 
months  that  Americans  have  been  going 
abroad  to  measure  investment  possibilities, 
to  investigate  offerings  of  securities,  and  to 
look  into  opportunities  for  profit  in  new 
developments,  new  combinations,  and  the 
application  of  new  methods. 

If  a  trade  balance  of  some  hundreds  of 
millions  of  dollars  is  to  be  settled  by  our 
taking  European  securities,  it  becomes  de- 
cidedly interesting  for  us  to  begin  to  study, 
from  an  investor's  point  of  view,  the  eco- 
nomic conditions  prevailing  there.  It  is 
140 


"  Commercial  Invasion  "  of  Europe 

from  such  a  point  of  view  that  I  intend 
to  present  some  of  the  points  that  appealed 
to  me  as  particularly  interesting  in  several 
of  the  European  countries. 

The  countries  forming  the  Triple  Alli- 
ance—  Germany,  Austria -Hungary,  and 
Italy  —  offer  the  most  widely  divergent  in- 
dustrial conditions;  but  because  of  politi- 
cal bonds  there  has  been  a  close  relation 
between  the  financial  and  commercial  inter- 
ests of  the  three  nations,  and  an  interchange 
of  capital,  so  they  have  come  to  form  a 
natural  industrial  group  as  well  as  a  political 
alliance. 

Of  all  the  European  powers  the  industrial 
newness  of  Italy  strikes  one  most  sharply. 
That  is  true  both  as  to  actual  lack  of  devel- 
opment, and  from  the  fact  that  one  natu- 
rally associates  Roman  surroundings  with 
age.  We  are  inclined  to  think  of  Italy  as 
a  land  of  cathedrals  and  art-galleries,  blue 
skies  and  sunshine,  where  the  rich  go  for 
pleasure,  and  the  poor  stay  to  beg;  and  the 
industrial  importance  of  the  country  is  not 
a  subject  that  many  of  our  own  people  have 
considered  deeply.  While  Italy  abounds  in 
glorious  history,  and  is  a  land  of  great  mem- 
ories, it  has  in  modern  times  held  a  com- 
paratively small  place  in  the  industrial  history 
of  the  world.  Developments  are  going  on 
there  now,  however,  particularly  in  the  north, 
141 


Business  and  Education 

which  promise  to  bring  the  measure  of 
Italy's  industrial  importance  much  higher  up 
in  the  column  of  totals.  Southern  Italy  is 
hopelessly  handicapped  for  a  long  time  to 
come  by  the  system  of  land-ownership,  the 
hardships  of  taxes,  the  extreme  poverty  of 
the  people,  and  their  consequent  deteriora- 
tion from  an  industrial  point  of  view,  and 
by  excessive  illiteracy.  The  elementary  and 
secondary  schools  there  are  incredibly  bad; 
teaching  is  the  least  honored  of  the  learned 
professions.  Conditions  are  far  better  in  the 
north.  There  are  found  small  individual 
ownership  of  land,  and  an  independence  and 
thrift,  in  striking  contrast  to  the  south.  The 
people  take  more  readily  to  industrial  pur- 
suits, too,  and  there  is  really  striking  prog- 
ress in  the  recent  upbuilding  of  many 
industries. 

Prior  to  1871,  when  church  and  state  were 
separated,  and  the  present  political  regime 
inaugurated,  the  industries  of  Italy  were 
comparatively  insignificant,  viewed  from  the 
standpoint  of  international  trade.  The  pop- 
ulation was  largely  given  up  to  agriculture. 
In  the  thirty  years  that  have  elapsed  there 
has  been  notable  industrial  growth,  and  that 
growth  is  now  going  forward  at  a  steadily 
accelerated  pace.  One-third  of  all  the  silk 
used  in  the  world  comes  from  Italy.  Nearly 
as  great  progress  has  been  made  in  the 
142 


"  Commercial  Invasion  "  of  Europe 

weaving  and  spinning  of  the  silk  cloth  as 
in  the  production  of  raw  silk.  In  three  years 
the  exports  of  woven  silk  have  risen  from 
$65,000,000  to  $100,000,000.  Great  prog- 
ress has  also  been  made  in  cotton-weaving. 
The  industry  did  not  exist  twenty-five  years 
ago,  while  now  it  employs  80,000  men 
and  produces  annually  an  output  valued  at 
$60,000,000. 

The  cheap  labor  of  Italy  and  its  compara- 
tive efficiency  have  attracted  English  manu- 
facturers. Two  or  three  of  the  best  known 
of  the  English  glove-makers  have  large  fac- 
tories in  Naples.  I  saw  gloves  there  being 
turned  out  by  the  thousands,  stamped  with 
the  imprint  of  well-known  English  names, 
and  completed  by  the  addition  of  buttons 
bearing  the  legend  "  Made  in  England  "  — 
a  bit  of  commercial  artifice  that  must  be 
confusing  to  customs  officials  when  they 
later  attempt  to  classify  England's  exports. 
Endless  cartons  of  beautifully  fashioned  arti- 
ficial flowers,  believed  by  the  people  who 
buy  them  to  have  been  created  by  the  deft 
touch  of  Parisian  fingers,  are  likewise  made 
in  Naples,  and  later  have  100  per  cent  or 
more  added  to  their  value  by  having  French 
names  pasted  on  the  boxes. 

The  industrial  development  of  Italy  has 
two  distressing  impediments.  One  is  the 
high  rate  of  taxes,  the  other  the  high  cost 
143 


Business  and  Education 

of  fuel.  In  army-ridden  Europe  there  is 
no  other  country  where  the  per  capita  cost 
of  maintaining  the  miHtary  estabhshment  is 
so  great  as  it  is  in  Italy,  and  no  other  coun- 
try where  the  people  are  so  little  able  to 
afford  the  glories  of  armies  in  the  field  and 
of  fleets  at  sea.  Italy  as  a  nation  is  out  of 
her  rank  in  attempting  to  maintain  a  first- 
class  war  footing,  and,  until  her  military  ex- 
penditures are  reduced  to  a  point  commen- 
surate with  her  population  and  wealth  the 
military  burden  will  be  an  almost  insur- 
mountable obstacle  to  the  desire  of  her  com- 
mercial citizens  to  have  the  country  take 
foremost  rank  as  a  producing  nation. 

A  hindrance  to  industrial  growth,  second 
in  importance  to  that  of  the  demand  of  the 
war-chests,  is  the  lack  of  coal.  All  the  coal 
used  on  the  railroads  and  in  the  factories 
is  shipped  from  other  countries,  and  Italy's 
trade  balance  is  reduced  each  year  by  the 
full  amount  of  her  fuel  bill.  This  not  only 
has  a  most  unfavorable  effect  on  her  balance 
of  trade,  but  it  means  that  the  cost  of  fuel 
in  Italy  is  very  much  higher  than  is  the  cost 
in  any  of  the  countries  with  which  she  must 
compete  industrially.  At  Italian  seaports 
the  price  of  coal  ranges  from  $7  to  $10  a 
ton.  In  Milan  manufacturers  pay  $12  a  ton 
for  coal  for  which  German  manufacturers 
pay  $6,  which  the  English  manufacturer  can 
144 


"  Commercial  Invasion  "  of  Europe 

get  for  $4,  and  which  is  laid  down  at  many 
factories  in  the  United  States  at  $2.50  a 
ton.  There  is  only  one  locality  in  the  king- 
dom where  coal  is  mined,  and  the  output  is 
small  and  the  quality  poor. 

There  seems  to  be  more  prospect  ahead 
for  Italian  industries  being  relieved  from 
the  burden  of  high  fuel  charges  than  from 
the  weight  of  excessive  military  taxes.  Italy 
abounds  in  water-power,  and  there  is  just 
now  a  great  awakening  in  regard  to  the 
development  of  that  latent  energy.  Manu- 
facturers are  coming  to  understand  that 
future  development  will  most  likely  be 
reached  along  lines  of  securing  power  at 
low  cost.  Italy  is  remarkably  favored  with 
water-power.  To  the  north  are  the  Alps, 
and  the  Apennines  run  far  south  along  the 
centre  of  the  Peninsula.  The  country  is  an 
immense  watershed,  down  which  innumer- 
able streams  flow,  none  of  them  very  large, 
but  all  falling  a  great  distance,  and  develop- 
ing in  their  descent  a  prodigious  amount  of 
power.  Engineers  who  have  made  a  study 
of  the  situation  estimate  that  the  rivers  of 
Italy  can  be  made  to  furnish  more  than 
2,5CX),ooo  horse-power,  which  has  a  value 
equivalent  to  coal  now  costing  $125,000,000. 
More  than  1000  companies  have  been  organ- 
ized in  the  last  few  years  to  erect  power 
plants  along  these  streams. 
'°  145 


Business  and  Ediocation 

Italy  is  lacking  in  any  large  fund  of  cap- 
ital available  for  aiding  her  industrial  devel- 
opment. Investment  in  stock  companies  has 
not  yet  become  popular.  The  Italian  is  ex- 
tremely distrustful  in  finance;  his  distrust 
has  a  fundamental  basis  in  a  fear  even  of 
banks  and  bank  accounts.  He  wants  to  keep 
his  property  out  of  the  sight  of  a  tax- 
gatherer,  and  he  does  not  put  great  depend- 
ence in  the  commercial  signature  of  his 
fellow.  The  use  of  bank-checks  in  current 
daily  business  is  almost  unknown.  There 
are  large  savings-bank  deposits,  but  the 
people  have  not  reached  a  point  in  com- 
mercial development  where  they  will  give 
their  capital  an  effective  aggregate  by  in- 
vestment in  corporate  securities.  Before 
Italy  cut  loose  from  France  and  joined  her 
political  fortunes  with  Austria  and  Ger- 
many, French  capital  had  looked  with  favor 
upon  Italian  enterprises.  After  the  political 
changes  of  1887,  the  Italian  exports  to 
France  dropped  from  $81,000,000  to  $34,- 
000,000,  and  have  continued  at  about  the 
lower  figure,  and  French  capital  ceased  to 
flow  into  Italian  investments.  That  has  in 
a  measure  been  compensated  for  by  the  in- 
terest that  German  capital  has  tal^en  in 
financial  operations,  but  Germany's  own  in- 
dustrial development  went  on  so  rapidly  and 
has  now  come  to  so  many  misfortunes  that 
146 


"  Commercial  Invasion  "  of  Europe 

the  present  offering  of   German   capital   is 
much  restricted. 

Italy  would  look  with  great  favor  upon 
any  project  to  interest  American  capitalists 
in  her  industrial  development,  and  undoubt- 
edly a  field  is  there  offered  which  will  bear 
some  inspection  at  the  hands  of  our  finan- 
ciers. In  certain  lines  there  is  no  possibility 
of  Italy  successfully  competing  with  the 
United  States,  England,  and  Germany.  The 
lack  of  coal  will  leave  the  country  out  of 
the  race  in  iron  and  steel  manufactures.  In 
those  lines  of  industry,  however,  where  cheap 
labor  is  required,  and  where  the  cost  of  raw 
material  is  favorable,  there  promises  to  be 
much  success.  The  labor  is  skilful  and 
effective,  and  manufacturers  are  not  slow 
in  accepting  mechanical  improvements  and 
adopting  modern  methods.  The  fact  that 
the  country  is  not  on  a  gold  basis  is  a  draw- 
back. Italian  financiers  are  anxious  to  estab- 
lish the  gold  standard.  The  Finance  Min- 
ister, Signor  Chimirri,  told  me  that  he  had 
strong  hopes  of  success  in  that  direction. 
It  is  recognized  that  the  present  uncertainty 
regarding  the  value  of  the  Italian  money 
standard  acts  as  a  serious  deterrent  to  the 
investment  of  foreign  capital  in  the  country. 
An  excessive  issue  of  bank-notes,  a  survival 
of  former  days,  is  the  main  reason  for  the 
depreciation  of  the  currency,  but  the  Gov- 
147 


Business  and  Ediocation 

ernment  now  has  a  definite  programme  for 
reducing  the  bank-note  circulation  by  a  fixed 
amount  each  year.  Pohtical  conditions  are 
in  many  respects  most  unsatisfactory.  In 
many  sections  there  is  distressing  poverty; 
and  the  high  price  for  food,  made  necessary 
by  heavy  taxation,  brings  dire  hardships  into 
the  Hves  of  the  common  people.  It  has  been 
estimated  that  the  average  Italian  laborer 
has  310  pounds  of  cereal  food  during  the 
year,  which  is  twenty-five  per  cent  less  than 
is  given  the  inmate  of  an  English  work- 
house. Socialism  is  rampant,  and  the  Gov- 
ernment must  be  constantly  on  the  alert  to 
prevent  uprising.  Judging  by  the  precau- 
tions taken,  there  are  sections  of  the  country 
at  all  times  on  the  point  of  an  outbreak 
against  constituted  authority,  inspired  by  no 
very  definite  political  reasons  and  due  more 
to  the  desperation  of  hunger  than  to  ideas 
in  political  opposition  to  the  Government. 
The  people  are  under  the  domination  of  an 
army  which  takes  not  only  the  best  blood 
of  the  country,  but  imposes  an  almost  un- 
bearable weight  of  taxation  on  those  left  to 
carry  the  burden.  The  army  and  navy  alone 
absorb  six  per  cent  of  the  country's  income ; 
or  in  other  words,  out  of  every  $100  earned 
in  Italy,  $6  is  taken  by  the  Government  in 
support  of  the  military  establishment. 
The  social  and  political  unrest,  the  bur- 
148 


"  Commercial  Invasion  "  of  Europe 

dens  of  taxation,  and  the  uncertain  money 
standard  must  cause  foreign  capital  to  hesi- 
tate even  before  opportunities  that  may  look 
alluring,  while  those  same  impediments,  to- 
gether with  a  lack  of  some  of  the  most 
essential  raw  materials  and  of  home  capital, 
must  make  the  further  industrial  develop- 
ment of  the  country  slow  when  measured  by 
our  standards.  The  United  States  has  no 
need  to  fear  Italian  competition  in  the 
world's  markets  in  any  of  the  great  staples 
of  our  manufactures.  There  is,  however, 
easy  possibility  of  greatly  increasing  our 
sales  to  Italy,  particularly  if  her  industrial 
development  goes  forward  along  lines  which 
permit  her  to  sell  to  us  some  commodities 
which  we  can  better  buy  than  produce. 

In  the  closing  days  of  his  public  career 
Prince  Bismarck  found  occasion  to  say, 
"  Poor  Austria,  I  fear  her  days  are  num- 
bered." Let  us  hope  the  Chancellor  did  not 
speak  prophetically,  but  he  certainly  spoke 
with  profound  perception  of  the  cross-drifts 
which  are  the  despair  of  the  statesmen  of 
Austria-Hungary.  One  of  the  most  restive, 
bewildering,  and  bewildered  state-unions  in 
existence  is  the  Dual  Monarchy,  a  country 
at  once  one  and  divided,  a  people  ready  to 
overturn  their  government  for  a  language 
preference,  a  country  of  twenty  tongues, 
149 


Business  and  Education 

each  one  berating  the  other,  a  country  the 
one-half  of  which  puts  trade  barriers  in  the 
way  of  the  other  half;  Hungary  jealous  of 
Austria,  and  Austria  unable  to  forgive  Hun- 
gary its  superior  prosperity.  The  monarchy 
is  made  up  of  conglomerate  peoples,  unable 
to  act  and  think  together,  and  habitually 
threatening  to  act  and  think  apart.  In  no 
other  country  of  Europe  are  industrial  condi- 
tions so  complicated  by  politics,  hereditary 
jealousies,  class  distinctions,  church  influ- 
ences, and  a  babel  of  tongues  that  cannot 
be  harmonized  either  in  speech  or  senti- 
ments. For  the  present  the  personality  of 
the  venerable  Franz  Joseph  holds  together 
these  varied  elements.  What  will  come  to 
the  Dual  Monarchy  after  Franz  Joseph  is 
a  question  never  out  of  the  mind  of  any 
European  statesman. 

It  is  in  the  midst  of  this  political  turmoil 
that  the  idea  was  born  for  a  European  tariff 
alliance  against  America.  It  is  here  that  one 
finds  the  keenest  antagonism  toward  com- 
mercial America,  and  the  most  earnest  efforts 
to  block  by  legislation  a  commercial  invasion 
that  could  not  be  met  by  methods  of  superior 
industrial  merit. 

The  president  of  the  Chamber  of  Com- 
merce at  Vienna  explained  to  me  the 
Austrian  position  on  this  matter  of  tariff 
discrimination  against  the  United  States. 
150 


"  Commercial  Invasion  "  of  Europe 

"  America  is  destined,  beyond  question,  to 
be  a  most  powerful  country,"  said  he.  "  We 
regard  it  as  the  most  dangerous  competitor 
in  all  our  markets.  The  marrow  and  bone 
of  her  prosperity  we  believe  to  be  her  pro- 
tective tariff,  which  has  enabled  her  to  build 
up  her  industries  and  develop  her  resources. 
The  Steel  Trust  shows  us  what  we  have  to 
expect  in  the  future.  We  shall  have  to 
adopt  the  same  policy,  and  we  will  do  it. 
Whenever  we  discover  that  American  com- 
petition is  hurting  any  of  our  industries,  we 
shall  certainly  shut  out  America  if  we  can. 
If  we  do  not  succeed  in  making  a  satisfac- 
tory treaty  with  the  United  States,  we  shall 
look  to  Russia  and  Australia  for  the  raw 
materials  we  may  need,  for  to  those  coun- 
tries we  shall  be  able  to  sell  the  products  of 
our  industry." 

These  words  must  not  be  considered  as 
the  expression  of  a  private  citizen,  but  as 
having  official  character,  for  the  Chamber 
of  Commerce  is  an  official  advisory  insti- 
tution for  the  aid  of  the  government  in  the 
preparation  of  legislation.  The  best  judg- 
ment in  Europe  and  America  is,  I  believe, 
pretty  well  agreed  on  the  futility  of  a  Euro- 
pean tariff  alliance  against  the  United  States. 
Not  one  of  our  ambassadors  or  ministers 
believes  it  is  a  feasible  programme  for  the 
European  States,  no  matter  how  antagon- 
ist 


Bwsmess  and  Education 

istic  European  statesmen  may  become  toward 
us  on  account  of  our  commercial  success  in 
foreign  fields.  I  found  no  important  banker 
or  manufacturer  who  thought  it  probable 
that  the  conflicting  interests  of  the  various 
States  could  be  brought  to  any  harmonious 
point  of  view  from  which  to  formulate  such 
a  tariff.  Undoubtedly  it  is  a  dream  in  the 
minds  of  many  people  who  have  not  a  clear 
idea  of  the  difficulties  involved,  but  certainly 
the  best  judgment  of  the  two  continents 
seems  against  the  feasibility  of  the  idea. 
Conflicting  interests  can  never  be  harmon- 
ized so  that  an  agreement  will  be  reached 
among  the  nations.  Indeed,  conflicting  in- 
terests in  the  Dual  Monarchy  itself  can  prob- 
ably never  be  harmonized  so  as  to  support 
Count  Goluchowski's  programme.  Austria 
is  a  manufacturing  country.  Her  people 
have  highly  developed  artistic  faculties,  and 
a  deftness  and  skill  which  make  her  a  leader 
in  certain  of  the  finer  lines  of  production, 
and  she  has  some  standing  as  a  producer 
of  iron,  steel,  and  machinery.  Hungary,  on 
the  other  hand,  is  as  yet  almost  altogether 
an  agricultural  country.  Austria  wants  high 
tariff  and  cheap  food;  Hungary  would  like 
to  exclude  foreign  food  and  have  the  advan- 
tage of  cheap  foreign  manufactures.  The 
two  parts  of  the  monarchy  are  held  to- 
gether by  a  slender  thread,  and  the  fretful 
'52 


"  Commercial  Invasion  "  of  Europe 

people  that  compose  the  two  nations  will 
only  agree  that  that  bond  may  hold  them 
for  ten  years  at  a  time.  The  Ausgleich 
expired  in  1897,  and  for  four  years  the 
two  States  have  wrangled  over  its  renewal, 
industry  and  commerce  being  all  that  time 
greatly  perturbed. 

If  we  look  at  Austria  as  a  competitor  for 
the  world's  trade,  it  is  easy  to  see  that  there 
is  small  occasion  for  us  to  be  alarmed.  The 
obstacles  which  political  conditions  set  up  in 
the  way  of  industrial  progress  are  almost  in- 
surmountable. Everywhere  in  Europe  there 
is  found  a  weight  of  taxes  bearing  on  in- 
dustry much  greater  than  with  us.  In  Aus- 
tria this  is  notably  so.  A  Viennese  engineer 
who  builds  iron  bridges  on  a  large  scale  told 
me  something  of  the  difficulties  an  Austrian 
manufacturer  has  to  face  as  a  result  of  the 
visits  of  the  tax-gatherer: 

*'  In  calculating  the  cost  of  a  piece  of 
work,"  he  said,  "  there  are  three  important 
elements:  the  cost  of  the  material,  the  cost 
of  labor,  and  the  allowance  for  taxation. 
Our  tax  laws  are  somewhat  complicated, 
but  I  have  found  that  an  approximation, 
which  is  close,  will  amount  to  sixty  per  cent 
of  the  labor  cost,  which  we  must  add  for 
taxes." 

If  manufacturers  in  this  country  were 
obliged  to  add  to  the  cost  of  their  products 
153 


Business  and  Education 

sixty  per  cent  of  what  they  pay  for  the  labor 
that  enters  into  them,  as  a  contribution  to 
federal  taxation,  our  success  in  the  world's 
competition  would  be  slow. 

In  Vienna  I  met  an  American  who  is  at 
the  head  of  one  of  the  large  boiler-works  in 
this  country.  He  had  been  interested  in 
making  comparisons  of  the  cost  of  labor  and 
of  the  methods  of  work  in  the  Viennese  fac- 
tories, and  I  found  him  amazed  at  the  waste- 
ful methods  and  the  high  labor-cost  that 
resulted  from  the  Austrian  manufacturers 
failing  to  use  modern  machinery. 

"  I  was  informed  in  one  shop,"  he  told 
me,  "  that  a  boiler  of  about  150  horse-power 
cost  for  labor  alone  $750.  That  boiler 
would  have  been  built  in  an  up-to-date  shop 
in  America  for  a  labor-cost  of  $150.  In 
the  United  States  three  workmen  with  mod- 
ern tools  would  accomplish  as  much  in  one 
day  as  would  be  done  by  four  workmen  in 
a  Vienna  shop  working  one  week.  The  cost 
of  the  labor  in  the  United  States  would  be 
about  $5,  the  men  receiving  for  this  class 
of  rough  work  a  little  more  than  $1.50  a 
day.  Of  the  four  men  in  the  Vienna  shop, 
two  would  receive  eighty  cents  a  day,  one 
sixty  cents,  and  one  forty  cents,  but  even  at 
those  low  wages  the  total  labor  cost  there 
would  be  $15.60  against  about  $5  with  us. 
I  found  an  almost  total  absence  of  labor- 
154 


"  Commercial  Invasion  "  of  Europe 

saving  machinery  in  some  of  the  largest 
shops  in  Vienna  —  plates  were  being  handled 
by  hand;  there  were  no  riveting  machines, 
no  travelling  cranes,  or  modern  hoists." 

I  asked  a  large  manufacturer  in  Vienna 
why  he  did  not  introduce  modern  labor- 
saving  machinery.  He  had  been  in  Amer- 
ican shops  and  was  fairly  well  posted  on 
what  was  possible  in  the  way  of  reducing 
the  amount  of  labor  entering  into  his  prod- 
uct.    His  line  of  reasoning  was  interesting : 

"  You  will  not  find  the  latest  labor-saving 
machinery  here,"  he  said,  "  because  labor  is 
so  cheap  that  it  does  not  pay  to  have  the 
best  machinery  as  it  does  with  you.  If  we 
invest  money  in  labor-saving  machinery,  the 
interest  on  the  cost  of  that  investment  goes 
on  every  day  in  the  year,  and  every  succeed- 
ing year,  whether  times  are  good  or  bad 
and  orders  many  or  few.  With  our  cheap 
labor  it  is  different.  When  we  have  a  rush 
of  work  we  can  employ  more  men ;  in  slack 
seasons  we  can  discharge  them.  The  trouble 
with  labor-saving  machinery  is  that  you  can- 
not discharge  it  when  you  have  no  work  for 
it  to  do." 

Labor  waste  is  not  confined  to  industrial 
life  by  any  means.  Austria  furnishes  end- 
less illustration  of  a  situation  which  is  found 
in  about  all  the  European  countries,  but 
which  is  in  its  highest  development  in  Italy, 
155 


Business  and  Education 

Austria,  and  Russia.  In  those  countries  the 
greatest  ingenuity  has  been  exercised  in 
devising  positions  where  the  service  per- 
formed is  useless.  Everyv^here  flunkeys 
stand  ready  to  perform  unnecessary  services 
for  one.  You  are  not  given  an  opportunity 
even  to  open  the  door -^  a  retainer  always 
stands  ready  to  do  it  for  you,  and  then  hold 
out  his  hand.  If  you  call  at  a  bank  or 
public  office,  the  concierge  opens  the  door 
with  great  obsequiousness  and  hands  you 
over  to  a  guide,  who  shows  you  to  the  door 
of  the  room  sought,  where  a  flunkey  takes 
your  hat  and  coat,  another  your  card,  and 
still  another  ushers  you  in.  On  leaving,  it 
is  advisable  to  remember  all  these  hard- 
working citizens  with  a  pittance  if  you  in- 
tend to  make  another  visit  and  desire  easy 
access.  All  this  is  typical  of  the  way  labor 
is  wasted  in  the  greater  part  of  the  Conti- 
nent of  Europe.  The  thing  seems  to  be  done 
on  principle,  and  to  be  generally  approved 
on  the  ground  that  that  system  is  best  which 
keeps  the  most  people  employed.  Any  man 
who  can  create  two  jobs  where  there  was 
only  one  job  before,  appears  to  be  regarded 
as  a  public  benefactor.  The  street-sprink- 
ling carts  in  Vienna  make  a  good  illustra- 
tion. A  hose  about  six  feet  long  is  attached 
to  the  rear  of  the  cart,  and  a  rope  about  ten 
feet  long  is  tied  to  the  end  of  the  hose.  One 
'56 


"  Commercial  Invasion  '*  of  Europe 

man  drives  the  cart  while  another  walks 
behind  holding  the  rope  and  swinging  the 
hose  from  side  to  side.  If  an  American 
should  try  to  introduce  sprinkling-carts  that 
could  be  operated  by  the  driver,  he  would 
certainly  be  unpopular.  "  Why  rob  a  poor 
man  of  his  job?  There  is  not  enough  work 
now  to  go  round,  and  labor  is  cheap.  It 's  a 
small  matter.  These  people  are  not  able  to 
do  anything  else;  they  have  no  trade,  and  if 
you  introduce  a  device  which  renders  their 
help  unnecessary  you  simply  force  them  to 
starve  and  become  a  burden  upon  the  State." 
That  is  the  kind  of  Chinese  economics  which 
I  heard  from  educated  men  in  various  cities 
on  the  Continent.  It  did  not  seem  to  occur 
to  them  that  work  makes  work;  that  the 
amount  of  work  which  the  world  wants  done 
and  is  ready  to  pay  for  is  capable  of  indef- 
inite increase,  or  that  habits  of  slothful  and 
unnecessary  work  must  breed  a  people  inca- 
pable of  energy  and  enterprise.  It  takes  two 
men  to  handle  a  plough  in  Europe,  not  be- 
cause one  man  really  cannot  do  it  alone,  but 
because  public  sentiment  approves  the  em- 
ployment of  an  extra  man  wherever  the 
slightest  excuse  can  be  found  for  him. 

It  needs  only  the  period  covered  by  the 
memory  of  a  man  still  young  to  make  the 
comparison  which  will  show  that  the  indus- 
trial life  of  Germany  is  in  its  beginnings. 
157 


Business  and  Education 

The  picture  of  Germany  twenty-five  years 
ago,  contrasted  with  the  industrial  Germany 
of  to-day,  shows  a  genius  for  work,  a  deter- 
mination for  development,  and  a  rapidity  of 
progress  which  can  be  matched  nowhere  in 
the  world,  unless  it  is  in  the  United  States. 
The  Germany  of  thirty-five  years  ago  bore 
almost  as  little  relation  to  the  Germany  of 
to-day  as  did  some  portions  of  the  United 
States  to  our  present  condition. 

A  great  plain  covering  the  entire  north 
and  east  of  the  country  where  small  crops 
were  grown  at  high  cost  and  with  great 
labor:  a  table-land  in  the  south  almost  as 
barren ;  a  few  seaports,  in  only  two  of  which 
was  there  entrance  for  vessels  of  the  deepest 
draught;  a  large  system  of  shallow  rivers; 
fertile  valleys  in  the  south  and  west,  but 
covering  not  over  one-tenth  of  the  area  of 
the  country;  large  deposits  of  low-grade 
iron  ore ;  a  coal  area  limited  in  extent  with 
deep-lying  seams  from  which  came  a  product 
of  poor  quality;  small  deposits  of  copper, 
lead,  and  zinc;  a  large  forest  in  the  south; 
a  small  commerce;  a  manufacturing  in- 
dustry hardly  worthy  of  the  name;  a  dis- 
ordered currency,  a  disorganized  banking 
system,  a  deranged  financial  system,  a  con- 
fused foreign  policy;  a  people  divided  into 
twenty-three  states  with  only  the  tie  of  a 
common  customs  union,  the  coercion  of  the 

158 


"  Commercial  Invasion  "  of  Europe 

Prussian  hegemony,  and  a  common  language 
and  literature  —  such  were  the  materials  of 
thirty-five  years  ago,  out  of  which  modern 
Germany  was  to  be  constructed. 

A  population  numbering  56,000,000, 
firmly  united  into  a  great  national  state;  a 
system  of  internal  communication  the  second 
largest  in  the  world;  a  foreign  commerce 
inferior  only  to  that  of  England  and  the 
United  States,  which  has  reached  out  to  the 
uttermost  parts  of  the  world  in  its  conquest 
of  markets,  and  has  won  its  place  in  the 
face  of  long-standing  commercial  connec- 
tions; a  system  of  industry  which  has  util- 
ized to  the  full  every  resource  the  nation  pos- 
sessed, which  has  brought  the  waste  places 
under  cultivation,  and  by  careful  methods  of 
scientific  agriculture  has  developed  the  yield 
of  the  soil  more  than  threefold,  creating  de 
novo  the  beet-sugar  industry ;  a  system  which 
has  quadrupled  the  production  of  coal  and 
tripled  the  production  of  iron;  which  has 
developed  the  greatest  chemical  trade,  the 
second  largest  electrical  industries,  the  third 
textile,  iron,  and  steel  industries,  and  the 
second  shipping  system  of  the  whole  world ; 
which  has  tripled  the  city  population,  re- 
duced a  large  and  threatening  emigration  to 
insignificant  proportions,  raised  wages,  in- 
creased the  value  of  land,  and  tripled  the 
revenues  of  the  State ;  a  strong,  self-reliant, 

159 


Business  and  Ediication 

progressive,  prosperous  nation  —  such  is 
modern  Germany,  the  result  of  thirty  years 
of  nation-building. 

Never  before  in  the  industrial  history  of 
the  world,  unless  we  except  the  victory  of 
the  same  race  in  the  Low  Countries  over  the 
waves  and  tides  of  the  German  Ocean,  has 
such  success  been  achieved  against  such 
heavy  odds.  England  has  succeeded,  but 
England  was  never  cursed  by  invasion  and 
civil  war.  England's  soil  is  fertile.  Her 
coasts  are  indented  with  fine  harbors.  Her 
security  made  her  the  home  of  the  great  in- 
ventions, and  those  inventions  gave  her  the 
commerce  of  the  world  for  more  than  three- 
quarters  of  the  nineteenth  century.  The 
United  States  has  succeeded,  but  the  United 
States  was  blessed  with  the  richest  heritage 
of  natural  wealth  that  ever  fell  to  the  lot 
of  any  people.  Planted  in  the  midst  of  a 
continent,  with  a  soil  of  extraordinary  rich- 
ness ;  with  the  coal  seams  lying  open  on  the 
river-banks,  and  iron  only  needed  to  be  quar- 
ried from  the  surface;  with  river  systems 
penetrating  every  part  of  the  country,  and 
a  chain  of  lakes  to  supplement  the  rivers; 
with  great  harbors  to  receive  and  send  out 
foreign  trade,  and  with  the  hungry  multi- 
tudes of  Europe  in  sore  need  of  our  surplus 
^ — with  all  these  natural  advantages,  and 
with  only  one  serious  catastrophe  to  our  na- 
i6o 


"  Commercial  Invasion  *'  of  Europe 

tional  development  for  eighty  years,  it  is 
no  wonder  we  have  succeeded. 

Germany  had  none  of  these  advantages. 
Germany  must  needs  dredge  her  seaports, 
deepen  her  rivers,  supply  her  deficiencies  in 
raw  material  by  importation,  import  the  ma- 
chinery for  her  factories,  and  the  technical 
skill  to  direct  the  machinery;  build  a  rail- 
road system  to  carry  her  manufactured 
goods  long  distances  to  the  sea-coast;  and 
when  she  has  done  all  this  must  fight  her 
way  into  markets  which  England  and  France 
had  long  since  occupied.  To  do  all  this 
while  guarding  against  invasion  on  both 
frontiers,  and  bearing  a  heavy  burden  of 
taxation  and  military  service,  to  succeed 
with  no  other  aids  than  those  of  the  national 
genius  for  hard  work  and  the  national  am- 
bition for  a  great  and  commanding  place 
among  nations,  and  to  win  such  success  in 
the  face  of  such  difficulties  is  an  achievement 
before  which  both  England  and  America 
should  uncover  in  admiration  and  surprise. 
If  the  measure  of  success  which  a  nation 
achieves  over  adverse  circumstances  is  the 
test  of  greatness,  then  Germany  is  the  great- 
est nation  in  the  world. 

I  reached  Germany  fresh  from  a  study  of 

most  of  the  other  Continental  countries.     In 

none  of  them  had  I  found  anything  to  lessen 

the  conviction  with  which  every  American 

II  i6i 


Business  and  Education 

goes  abroad,  that  his  own  country  is  supe- 
rior in  every  respect  to  all  other  nations. 
Most  of  those  nations  are  in  one  respect  or 
another  unmodern  and  unprogressive.  They 
are  succeeding  slowly,  and  in  few  of  the 
countries  are  the  whole  people  united  in  an 
effort  to  achieve  success.  Their  industrial 
regeneration  is  only  just  beginning:  the 
United  States  has  little  to  learn  from  them. 

But  in  Germany  we  find  not  only  a  state 
with  apparently  a  great  future,  but  a  state 
which  has  begun  to  realize  that  future  in  a 
thoroughly  modern  way.  The  system  of 
education,  elementary,  secondary,  and  uni- 
versity, certainly  rivals  our  own,  and  is  prob- 
ably superior  to  it.  It  is  a  system  which 
leaves  less  than  three  per  cent  of  the  popu- 
lation illiterate,  and  sifts  out  the  brightest 
minds  and  trains  them  for  the  service  of  the 
State.  The  State  in  turn  is  eager  and  anx- 
ious to  avail  itself  of  the  services  of  men  who 
have  won  intellectual  distinction.  There  is 
a  system  of  commercial  education  whose 
founders  realized  that  successfully  to  deal 
with  foreigners  requires  a  speaking  and 
writing  knowledge  of  their  language.  There 
is  a  national  and  municipal  administration 
which  in  their  effectiveness  and  absolute  in- 
tegrity must  bring  shame  to  the  resident  of 
almost  any  American  city  when  he  compares 
them  with  conditions  surrounding  him  at 
162 


"  Commercial  Invasion  **  of  Europe 

home.  The  Government  has  encouraged 
commerce  and  foreign  trade  with  great  in- 
telHgence.  It  has  estabhshed  the  gold  stan- 
dard and  so  organized  the  Reichsbank,  that 
the  mechanism  of  exchange  has  the  founda- 
tion of  secure  confidence.  It  has  aided  in  the 
estabhshment  of  German  banks  abroad,  and 
placed  German  traders  in  the  position  of 
distinct  advantage  in  pushing  their  commer- 
cial conquests.  A  trained  consular  service 
has  been  developed,  composed  of  men  who 
speak  the  language  of  the  country  to  which 
they  are  sent,  and  who  use  the  language  to 
find  out  whatever  may  be  of  service  to  the 
German  exporter. 

The  Government  has  pursued  a  consistent 
policy  in  its  trade  relations  and  commercial 
treaties,  which  has  all  along  been  wisely 
adapted  to  the  needs  of  the  national  econ- 
omy. While  the  industries  were  getting  a 
foothold,  they  were  protected  by  high  duties. 
When  their  development  had  reached  the 
stage  of  independence,  and  when  their  chief 
need  was  new  markets,  the  Government  made 
concessions  to  neighboring  States  in  the  cus- 
toms tariff,  and,  by  a  series  of  treaties  com- 
pleted in  1893,  admitted  raw  materials  at 
low  duties  in  return  for  similar  privileges 
conceded  to  German  manufactured  exports. 
The  Government  early  saw  that  private  rail- 
way management  in  Germany  was  unfa- 
163 


Business  and  Editcation 

vorable  to  the  export  trade,  because  it  had  not 
learned  the  lesson  of  scientific  rate-making, 
which  we  in  the  United  States  have  only  in 
recent  years  mastered.  Perceiving  this  fact, 
the  German  Government  took  most  of  the 
private  lines,  and  added  to  them  until,  in 
1901,  out  of  30,777  miles  of  railway  more 
than  27,000  belonged  to  the  State.  In  full 
control  of  the  railway  system,  the  State  ad- 
ministration has  worked  out,  very  success- 
fully, the  basic  principles  of  rate-making,  to 
increase  the  rates  with  the  value  of  the 
freight.  It  has  granted  low  rates  on  iron 
and  coal,  to  which  concessions  the  iron  and 
steel  industry  of  Westphalia  owes  in  large 
measure  its  prosperity.  The  German  Gov- 
ernment also  has  not  hesitated  to  use  the 
bounty  system  to  build  up  the  national  in- 
dustries. The  beet-sugar  industry  owes  its 
existence  quite  as  much  to  the  aid  of  the 
State  as  to  the  painstaking  care  of  the  owner 
and  scientist,  and  in  a  single  year  the  exports 
of  sugar  and  glucose  to  Great  Britain  from 
Germany  have  amounted  to  more  than  $50,- 
000,000.  The  German  merchant  marine  has 
been  intelligently  assisted  by  liberal  subsi- 
dies. I  found  among  business  men  a  quite 
general  agreement  as  to  the  great  benefits 
which  industry  and  commerce  had  derived 
from  subsidies. 

I  asked  Mr.  Louis  J.  Magee,  who  might 
164 


"  Commercial  Invasion  "  of  Europe 

be  called  an  American-German,  since  he  was 
born  and  educated  in  this  country,  but  has 
spent  twelve  years  in  Germany  as  the  man- 
aging director  of  the  Union  Electrical  Ge- 
sellschaft,  what  in  his  opinion  were  the  rela- 
tive advantages  of  Germany  and  America. 
His  reply  is  suggestive :  "  Most  Americans 
are  mistaken  when  they  imagine  that  Amer- 
ica is  much  ahead  of  Germany  in  manufac- 
turing. It  is  six  of  one  and  half  a  dozen  of 
the  other.  In  some  lines  the  United  States 
has  the  advantage  and  is  sending  in  goods 
to  Germany.  This  is  true  of  typewriters, 
bicycles,  and  of  some  other  specialties  re- 
quiring interchangeable  parts.  It  is  hardly 
true  that  Germany  cannot  make  these  things 
as  well  as  America,  but  rather  that  it  is  more 
convenient  and  cheaper  for  Germany  to  buy 
them  of  America  than  make  them.  Our 
company,  for  instance,  might  make  much  of 
the  machinery  that  we  use,  but  it  has  rela- 
tions with  the  parent  company  in  America, 
and  so  buys  the  things  from  America.  It 
should  be  noted  also  that  Germany  excels  in 
some  specialties;  for  example,  the  Mauser 
rifle.  It  is  the  best  in  the  world,  and  Ger- 
many is  exporting  it  to  all  countries.  In  the 
same  way  your  laboratories  import  certain 
chemicals  and  certain  instruments  from 
Germany,  not  because  America  cannot  make 
them,  but  because  they  are  cheaply  made  in 


Business  and  Education 

Germany  and  that  is  the  best  place  to  get 
them.  Americans  make  a  great  mistake  in 
supposing  that  Germany  is  not  up  to  date. 
Every  German  manufacturer  knows  exactly 
what  is  being  done  in  his  line  in  the  United 
States,  and  knows  what  kind  of  machinery 
is  being  used.  If  he  does  not  use  it  himself 
he  has  a  reason  that  is  satisfactory  to  him. 
The  Germans  are  more  conservative  than 
the  Americans. 

"  This  fact  can  be  illustrated,  perhaps,  by 
the  automobile  cab  system.  A  superficial 
observer,  knowing  that  these  cabs  were  in 
use  in  American  cities,  would  draw  the  con- 
clusion that  Germany  was  not  so  progressive 
as  America.  But  if  he  happened  to  know 
that  the  companies  in  Boston  and  Chicago 
had  been  financially  unsuccessful,  his  con- 
clusion might  not  be  so  unfavorable  to  the 
German.  The  German  has  considered  the 
advantages  of  the  electric  cab  very  carefully, 
and  has  not  introduced  them  in  the  German 
cities  simply  because  he  has  decided  that  they 
would  not  pay." 

Somewhat  along  this  line  Mr.  Magee 
spoke  of  the  Germans'  ability  in  the  field  of 
science,  and  commended  their  habit  of  stim- 
ulating and  encouraging  independent  inves- 
tigation. He  regarded  the  Germans  in  this 
respect  as  superior  to  the  Americans. 
"  Americans  are  brilliant,"  he  said,  "  and 
i66 


**  Commercial  Invasion  "  of  Europe 

many  splendid  ideas  —  which  the  Germans 
call  epoch-making  —  such  as  the  cotton-gin, 
have  come  spontaneously.  In  the  main, 
however,  this  is  not  the  case.  The  great  dis- 
coveries of  the  world  have  come,  as  a  rule, 
as  the  result  of  patient  effort  and  study.  In 
this  the  Germans  are  adepts.  In  Germany 
every  encouragement  is  given  to  a  man  to 
devote  time  and  thought  to  new  ways  of 
doing  things."  Mr.  Magee  spoke  of  the 
Nernst  lamp  in  this  connection.  This  dis- 
covery of  a  German  professor  will  make  it 
possible,  it  is  believed,  to  secure  illumina- 
tion from  electricity  with  only  half  of  the 
current  used  that  is  now  necessary.  It  will 
throw  into  the  hands  of  many  thousands  of 
people  the  possibility  of  using  this  form  of 
illumination.  "  It  is  quite  possible,"  Mr. 
Magee  said,  "  that  improvements  on  this 
lamp  may  come  from  America.  It  will  still 
be  the  Nernst  lamp,  however.  What  I  want 
to  see  is  a  Nernst  in  America."  During  the 
last  few  years  the  reports  of  scientific  dis- 
coveries contained  in  the  American  scien- 
tific journals  have  contained  hardly  an 
American  name  to  act  as  a  landmark.  The 
names  of  the  chief  men  in  science  to-day  are, 
with  almost  no  exceptions,  men  of  foreign 
birth  or  descent. 

"  The  difference,"  said  Mr.  Magee,  "  lies 
in  the  fact  that  the  Germans  are  patient, 
167 


Busmess  and  Edtication 

studious,  thorough  people,  and  they  go  to 
the  bottom  of  things.  The  Americans,  on 
the  other  hand,  are  more  or  less  superficial. 
They  are  brilliant,  but  they  have  n't  time  to 
look  at  a  subject  from  all  sides  and  probe 
into  it  deeply  as  the  Germans  do.  In  science, 
particularly,  there  is  n't  the  inducement  that 
is  offered  to  investigators  here  in  this  coun- 
try. In  other  fields  the  same  conditions  hold 
true.  In  political  economy,  for  instance,  you 
find  the  same  thing.  A  man  learns  a  little 
from  his  Walker  and  his  Adam  Smith  in 
college,  but  he  does  not,  as  the  Germans  do, 
have  pointed  out  to  him  the  exact  places 
v^here  the  requirements  are  not  fulfilled, 
where  the  shoe  pinches,  and  then  set  to  work 
to  gather  all  the  data  bearing  on  that  par- 
ticular part  of  the  problem,  in  order  that  he 
may  find  a  solution  of  the  difficulty." 

One  is  at  once  impressed  with  the  fact 
that  the  Germans  have  been  quicker  than 
other  nations  to  take  advantage  of  improved 
machinery  and  methods.  An  inspection  of 
our  exports  to  Germany  in  the  last  half 
dozen  years  shows  an  extremely  satisfactory 
increase  in  our  sales  of  manufactured  goods, 
but  an  analysis  of  the  character  of  those 
manufactures  brings  out  the  fact  that  a  large 
part  has  been  in  labor-saving  machines, 
whose  economics  have  at  once  been  turned 
against  us.  There  are  some  shops  in  Ger- 
i68 


"  Commercial  Invasion  "  of  Europe 

many  that  are  quite  as  admirably  fitted  with 
modern  machinery  as  would  be  correspond- 
ing shops  with  us;  and  with  such  superior 
equipment,  and  with  labor  costing  little  if 
any  more  than  half  what  our  labor  is  paid, 
the  German  manufacture  will  make  us  look 
to  our  laurels. 

It  is  true  that  present  economic  conditions 
in  Germany  are  far  from  satisfactory.  Ger- 
many has  gone  ahead  under  too  great  a 
pressure.  The  pendulum  has  swung  too  far 
and  is  swinging  back.  There  has  for  some 
months  been  a  marked  depression  in  many 
manufacturing  lines,  and  conditions  have 
prevailed  that  have  caused  apprehension  and 
loss.  The  German  banks  do  not  follow  the 
conservative  English  and  American  custom 
regarding  the  promotion  of  industrial  enter- 
prises, and  some  of  them  have  become  in- 
volved in  the  fate  of  corporations  which  they 
have  promoted  and  whose  securities  they 
have  sold  to  their  clients.  I  believe  the  un- 
satisfactory situation  in  Germany,  however, 
is  only  a  reaction  from  too  rapid  progress ; 
the  fundamental  conditions  are  sound,  and 
in  the  world's  markets  we  are  pretty  sure 
to  find  Germany  one  of  our  most  able  com- 
petitors. 

While  the  conditions  surrounding  invest- 
ments in  Germany  are  in  many  respects  much 
better  than  in  Italy  or  Austria-Hungary,  the 
169 


Busmess  and  Education 

superior  conditions  are  conpensated  by  lower 
interest  returns.  The  Germans  are  wide- 
awake financiers,  as  well  as  manufacturers, 
and  the  opportunity  for  American  capital- 
ists to  teach  them  lessons  is  not  as  good  as 
in  most  of  the  other  European  countries. 
In  some  respects  we  could  learn  a  good  deal 
that  would  be  of  advantage  to  our  own  in- 
vestment circles  from  the  German  practice. 
A  code  of  corporation  laws  has  been  en- 
acted that  has  many  points  of  great  excel- 
lence, but  the  Government  has  shown  its 
paternalism  to  a  great  degree  in  its  effort  to 
control  operations  on  the  stock  and  produce 
exchanges,  and  business  has  been  much  ham- 
pered from  that  cause. 

Kaiser  Wilhelm  has  said  —  and  industrial 
Germany  agrees  with  him  —  that  the  future 
of  the  German  nation  lies  on  the  sea.  Ger- 
many is  a  poor  country.  Her  coal  mines  are, 
in  some  places,  3,000  feet  deep.  Her  iron 
ores  must  be  supplemented  from  the  richer 
deposits  of  Spain  and  Sweden.  As  popula- 
tion increases,  Germany  must  import  an  in- 
creasing proportion  of  her  food-supply.  Her 
raw  silk  and  cotton  must  be  imported,  and 
in  fact  she  is  independent  in  no  single  raw 
material.  Her  people  must  levy  upon  the 
whole  world  for  their  sustenance  and  to 
maintain  their  industries.  To  such  a  nation 
foreign  commerce  is  as  the  breath  of  life. 
170 


"  Commercial  Invasion  "  of  Europe 

If  four  continents  should  sink  into  the  sea, 
the  United  States  would  still  live.  But  cut 
off  Germany  from  her  foreign  trade,  and 
she  must  perish. 

To  sum  up  the  situation,  so  far  as  the  na- 
tions of  the  Triple  Alliance  are  concerned, 
we  see  that  Italy  and  the  Dual  Monarchy 
are  not  likely  to  become  formidable  competi- 
tors of  ours  in  the  world's  markets;  that 
Germany  is  endowed  with  a  spirit  and  am- 
bition which  will  probably  make  her  our 
keenest  rival,  although  we  have  clear  ad- 
vantages in  cheap  raw  materials.  If  we  turn 
our  attention  toward  investments  in  these 
countries,  attractive  opportunities  will  be 
found  in  Italy,  but  hampered  by  an  uncer- 
tain currency  standard  and  excessive  tax- 
ation. Opportunity  for  the  introduction  of 
improved  methods  is  even  greater  in  Aus- 
tria, but  political  uncertainties  and  racial  an- 
tagonism more  than  counteract  that  advan- 
tage, and  the  money  standard  is  quite  as 
uncertain  as  in  Italy.  There  is  much  greater 
investment  safety  in  Germany,  and  that,  I 
believe  is  true,  in  spite  of  the  headlong  de- 
clines which  securities  have  made  on  the 
German  exchanges. 


171 


Business  and  Education 


III.    England,  France,  and  Russia 

It  is  in  Great  Britain  that  we  find  in  its 
fullest  development  the  effect  of  the  Ameri- 
can commercial  invasion  of  the  world's  mar- 
kets. It  is  true  that  American  competition 
has  been  making  notable  inroads  into  the 
commerce  of  all  the  countries  of  Europe. 
But  important  as  is  the  effect  which  has  been 
produced  upon  commercial  conditions  in  the 
Continental  countries,  that  result  is  almost 
insignificant  when  compared  with  the  con- 
sequence of  this  competition  in  Great  Bri- 
tain. From  the  beginning  of  our  history 
England  has  formed  our  most  important 
market,  and  for  two  generations  at  least  we 
have  been  the  largest  customers  for  English 
products.  In  the  last  half  dozen  years  a 
change  has  taken  place  in  the  trade  balance 
between  the  two  nations  which  is,  perhaps, 
the  most  notable  single  commercial  event  to 
be  recorded  in  the  last  decade.  We  have 
been  steadily  reducing  our  purchases  from 
the  mother-country;  we  have  been  making 
astounding  increases  in  our  sales  to  her. 
Comparing,  for  instance,  the  change  which 
has  taken  place  in  the  trade  movement  be- 
tween the  two  nations  in  the  last  half  dozen 
years  we  see  that  our  annual  purchases  from 
the  United  Kingdom  have  dropped  $16,000,- 
172 


"  C(ymmmM'Trvva^ion  "  of  Europe 

ooo,  standing  last  year  at  $143,000,000.  In 
the  same  period  our  sales  to  Great  Britain 
nearly  doubled,  going  up  from  $387,000,000 
in  1895  to  $631,000,000  last  year.  This 
change  in  the  annual  trade  balance,  showing 
for  us  a  more  favorable  total  by  $260,000,- 
000  than  we  had  six  years  ago,  is  a  change 
of  such  import  as  can  only  mean  revolution- 
ary transformation  in  the  industrial  life  of 
the  two  nations.  These  figures  are  so  sig- 
nificant that  they  need  to  be  dwelt  on  some- 
what, to  fix  in  the  mind  their  importance. 
Six  years  ago  we  sold  to  Great  Britain 
$228,000,000  more  than  we  bought.  Last 
year  we  sold  to  her  $488,000,000  more  than 
our  purchases.  In  every  business  day  last 
year  we  sent  to  her  $1,500,000  more  than  we 
bought.  For  every  dollar's  worth  of  goods 
we  bought  we  sold  her  four  dollars  and 
forty-one  cents'  worth  of  our  products. 

The  relative  importance  of  the  increase 
in  our  trade  with  Great  Britain  is  shown 
when  we  compare  it  with  the  increase  which 
we  have  made  in  our  sales  to  all  the  rest  of 
Europe.  Noting  that  our  favorable  balance 
in  the  trade  with  Great  Britain  last  year 
showed  an  increase  of  $488,000,000  over 
the  record  of  1895,  we  find  that  that  figure 
compares  with  an  increase  in  the  same  period 
of  $219,000,000  in  our  trade  with  all  Con- 
tinental Europe. 

173 


Busmess  and  Education 

Such  figures  as  these  make  it  easy  to  see 
why  the  industries  of  Great  Britain  have 
more  keenly  felt  our  competition  than  has  the 
rest  of  Europe,  but  even  these  statistics  by 
no  means  measure  in  its  full  significance  the 
efifect  upon  British  commerce  of  the  ''  Amer- 
ican invasion." 

The  nineteenth  century  may  well  be  said 
to  have  been  the  century  of  Great  Britain's 
commercial  supremacy.  During  that  hun- 
dred years  the  industries  of  the  country  stood 
pre-eminent  in  almost  every  line  of  manufac- 
turing. British  manufacturers  commanded 
completely  their  domestic  field,  but  they  did 
much  more  than  that.  They  were  in  easy 
control  of  the  greater  part  of  the  world's 
commerce  in  manufactured  products.  Not 
only  have  their  workshops  held  a  command- 
ing position,  but  pre-eminence  has  been  made 
more  secure  by  control,  in  large  measure, 
of  the  commercial  fleets  of  the  world. 

When  our  own  manufacturers  began  seri- 
ously to  reach  out  a  few  years  ago  for  for- 
eign trade,  there  were  few  of  them  with  the 
hardihood  to  attempt  to  meet  British  com- 
petition in  the  home  field.  What  we  did  do 
was  successfully  to  compete  at  points  so  far 
distant  from  the  British  factories  that  our 
own  producers  were  little  handicapped  in 
the  way  of  freight  charges.  We  success- 
fully entered  the  South  African  gold-fields 

174 


"  Commercial  Invasion  **  of  Europe 

and  supplied  most  of  the  machinery  for  oper- 
ating the  deep  mines  of  the  Rand.  We  went 
into  the  harvest  fields  of  almost  every  British 
colony  and  sold  agricultural  implements  to 
cultivate  and  gather  their  grain.  We  began 
successfully  to  compete  in  bridge-building 
on  the  pioneer  railroads  of  Africa,  and  then 
we  supplied  those  railways  with  locomotives, 
as  we  did  also  the  government  lines  of  India 
and  the  Far  East.  Our  success  extended 
rapidly,  and  it  soon  became  evident  that  the 
political  ties  of  Great  Britain's  colonies  were 
not  in  themselves  sufficient  to  bind  to  her 
their  trade.  For  a  good  many  years  English 
contractors  had  things  their  own  way  in 
railroad-building  in  the  British  colonies. 
One  day  we  shocked  them  when  their  own 
best  bid  of  15  guineas  a  ton  for  construct- 
ing the  Atbara  Bridge  was  met  by  an  Amer- 
ican bid  of  £10  13s.  6d.,  and  their  time  of 
twenty-six  weeks  was  cut  by  the  American 
contractor  to  fourteen  weeks.  They  were 
soon  still  more  surprised  when  the  bids  for 
the  Gokteik  viaduct  in  Burma  were  opened. 
This  was  a  much  more  important  work. 
The  best  English  bid  was  £26  los.  per  ton, 
with  three  years'  time  to  complete  the  job. 
Americans  took  the  contract  at  £15  a  ton  and 
completed  the  work  in  twelve  months.  The 
Ugandy  viaducts,  still  more  important  in 
size,  were  built  by  American  contractors  at 

175 


Business  and  Education 

a  cost  twenty  per  cent  below  the  English 
price,  and  they  were  completed  in  forty-six 
weeks,  against  the  English  requirement  of 
130  weeks. 

Such  illustrations  might  be  almost  indef- 
initely extended,  nor  would  they  need  to  be 
confined  to  bridge-building.  Their  special 
importance  is  in  the  basis  which  they  formed 
for  a  manufacturing  competition  which  drew 
nearer  and  nearer  to  the  home  market  of 
English  manufacturers.  Success  upon  suc- 
cess has  attended  our  efforts  to  compete  in- 
dustrially with  England,  until  we  are  at  last 
sending  our  manufactured  goods  into  the 
centre  of  the  Englishmen's  domestic  field. 
There  are  English  districts  whose  names 
have  become  words  in  our  language  synony- 
mous with  certain  great  classes  of  manu- 
factured goods.  We  have  come  to  compete 
successfully  in  those  very  fields  in  their 
great  specialties.  It  is  literally  true  that  we 
have  sold  cottons  in  Manchester,  pig-iron 
in  Lancashire,  and  steel  in  Sheffield. 

Details  of  this  invasion  cover  a  broad 
field.  The  changed  relations  between  the 
industries  of  the  two  countries  are  probably 
the  most  pronounced  in  the  production  of 
iron  and  steel,  but  in  a  hundred  lines  of 
manufactures  statistics  tell  the  same  story  of 
great  growth  in  our  exports  and  quiescence 
or  decadence  in  the  corresponding  British 
176 


"  Commercial  Invasion  "  of  Europe 

field.  Much  less  than  a  score  of  years  ago 
England  produced  twice'  as  much  pig-iron 
as  was  produced  in  the  United  States.  Now 
we  have  an  output  half  as  much  again  as 
England's,  in  spite  of  the  fact  that  her  own 
industry  has  steadily  grown.  For  many 
years  we  drew  upon  England  for  great 
stocks  of  iron.  Our  early  railroads  were 
laid  with  English  rails.  Now  we  are  ship- 
ping many  thousand  tons  back  across  the 
Atlantic  to  her  and  to  her  colonies  around 
the  world.  The  record  in  iron  has  been  far 
eclipsed  by  the  development  in  steel  pro- 
duction. We  reached  a  point  where  we 
could  put  unwrought  steel  into  the  English 
markets  in  successful  competition  with  the 
steel  mills  there,  and  with  that  as  a  basis  to 
build  on  and  with  the  aid  of  superior  me- 
chanical genius  we  have  built  up  a  market 
of  great  proportions  for  almost  every  line 
of  iron  and  steel  manufactures.  We  sent  to 
England  in  a  single  year  lOO  locomotives. 
We  have  sent  numberless  stationary  engines 
of  all  types  and  sizes,  and  with  them  boilers, 
pipes,  pumps  and  pumping  machinery,  car- 
wheels  by  the  thousand,  wire  and  wire  nails, 
metal-working  machinery  of  every  type,  and 
great  shipments  of  electrical  dynamos  and 
appliances. 

One  of  the  industries  that  has  felt  most 
severely  the  American  competition  is  the  tin- 
12  177 


Business  and  Education 

plate  trade  of  South  Wales.  Ten  years  ago 
it  was  a  gigantic  industry.  It  had  no 
thought  of  competition  in  the  home  field  and 
had  complete  control  of  the  American  mar- 
ket. In  1890,  330,000  tons  of  tin-plates 
were  exported  from  Wales  to  America. 
Soon  after  that  we  began  turning  out,  al- 
most in  an  experimental  way,  a  small  prod- 
uct of  tin-plate.  That  production  has  in- 
creased with  such  rapidity  that  our  manu- 
facturers are  practically  in  control  of  their 
home  market  and  have  actually  landed  at 
Cardiff  large  shipments  of  American  tin- 
plate. 

England's  coal-mines  have  been  one  of 
her  most  important  sources  of  wealth.  They 
have  given  to  her  manufacturers  cheap  mo- 
tive power  which  has  been  one  of  their  most 
important  advantages.  They  have  propelled 
the  commercial  fleets  of  the  world,  and  their 
product  has  formed  England's  most  impor- 
tant export.  Coal  has  been  the  main  sup- 
port of  the  shipping  industries  which  have 
given  her  so  much  of  her  commercial  su- 
premacy, constituting,  as  it  has,  four-fifths 
of  the  weight  of  all  the  commodities  ex- 
ported from  the  British  Isles.  England 
owns  sixty  per  cent  of  the  world's  steam 
tonnage,  and  anything  which  threatens  seri- 
ously to  alter  the  established  order  in  freight 
movements  is  of  great  commercial  import. 
178 


"  Commercial  Invasion  "  of  Europe 

The  foreign-trade  rettyns  do  not  yet  show 
us  as  a  great  factor  in  the  world's  coal  trade. 
England  is  still  the  dominating  producer. 
But  while  the  extent  to  which  our  exports 
have  attained  is  not  material,  the  figures 
which  show  the  beginning  of  our  entrance 
into  the  world's  coal  markets  are  in  some 
ways  more  significant  than  any  others  that 
our  foreign  trade  presents.  We  are  just  in 
the  beginning  of  what  is  certain  to  be  an 
economic  development  of  world-wide  im- 
portance. English  authorities  themselves 
recognize  this  and  admit  that  a  new  current 
of  trade  has  been  set  in  motion  that  will 
sweep  away  a  lot  of  old  landmarks.  Our 
production  of  36,000,000  tons  in  1870,  in- 
creased to  71,000,000  in  1880,  to  170,000,- 
000  in  1890,  and  to  240,965,917  by  the  end 
of  the  century,  passing  with  the  closing 
years  Great  Britain's  production  and  estab- 
lishing our  coal-fields  as  the  greatest  source 
of  supply  in  the  world.  The  enormous 
development  of  our  own  consumption  kept 
pace  with  the  increase  of  the  product,  so 
that  little  attention  has  been  turned  toward 
the  export  trade.  Plans  are  now  in  hand, 
however,  which  will  make  the  development 
of  that  export  business  the  dominating  feat- 
ure of  our  foreign  trade  within  the  next  few 
years,  and  which  promise  more  powerfully 
to  affect   British   industry   than   any   other 

179 


Business  and  Edtication 

single  development  that  has  influenced'  the 
trade  of  the  two  countries. 

The  position  which  we  occupy  as  a  source 
of  coal  production  is  of  such  great  impor- 
tance in  any  discussion  of  international  trade 
that  it  is  worth  while  noting  some  of  its 
significant  features.  In  1870  the  combined 
coal  production  of  Great  Britain,  Germany, 
France,  and  Belgium,  our  chief  competitors 
in  Europe,  was  176,000,000  tons,  about  six 
times  our  own  production  of  29,000,000. 
By  1898  the  European  output  had  doubled, 
those  countries  producing  352,900,000  tons. 
But  in  that  same  time  our  output  had  in- 
creased 700  per  cent  and  stood  at  218,000,- 
000,  or  60  per  cent  of  the  total  output  of 
Europe,  as  compared  with  six  and  two- 
thirds  per  cent  in  1870.  We  have  five  times 
the  coal  area  of  Europe,  50,000  square  miles 
as  compared  with  11,000  square  miles,  and 
we  have  in  addition  200,000  square  miles  of 
lignite  and  other  workable  fields  in  reserve. 
Our  bituminous  coal  lies  near  the  surface, 
and  most  of  it  can  be  worked  by  drift  mines 
above  the  water-level.  European  mines  are 
frequently  3000  and  sometimes  4000  feet 
deep.  Our  seams  of  coal  average  twice  the 
thickness  of  the  coal  measures  of  Europe. 
The  result  of  these  conditions  is  seen  in  the 
increasing  cost  of  European  coal  and  the 
decline  in  American  mine  prices.  In  1885 
180 


"  Commercial  Invasion  "  of  Europe 

the  average  price  of  European  mine  coal 
was  $1.62  per  ton,  and  in  the  United  States 
$1.58.  Our  methods  were  less  skilful  and 
the  superior  advantages  of  the  mines  in  the 
United  States  were  not  yet  manifest.  In 
1899,  however,  the  mine  price  of  European 
coal  had  risen  to  $1.96,  and- in  the  United 
States  the  price  had  fallen  to  $1.10,  leaving 
a  margin  in  our  favor  which  operates,  at 
every  stage  of  production,  to  lower  the  man- 
ufacturing cost  of  American  exports. 

Illustrations  of  our  successful  competition 
might  be  multipHed  into  a  tiresome  cata- 
logue. We  have  secured  practical  control 
of  the  match-making  industry;  our  tobacco 
manufacturers  have  become  the  dominating 
influence  in  the  English  trade  situation; 
half  the  newspapers  of  England  are  printed 
on  American  presses  or  upon  presses  built 
on  American  models  in  English  shops  that 
are  branches  of  the  home  manufactories. 
Many  of  those  newspapers  are  printed  on 
American  paper.  One  of  the  serious  ob- 
stacles hampering  English  industries  is  illus- 
trated in  the  paper  trade.  The  freight  from 
the  New  England  paper-mills  to  the  London 
Docks  is  less  than  from  the  Cardiff  mills  to 
the  metropolis,  and  one-half  the  freight 
charge  on  an  American  shipment  is  made  up 
of  terminal  charges  incurred  in  the  last 
twelve  miles  of  the  3000-mile  journey. 
181 


Business  and  Education 

Probably  half  the  electric  cars  in  the  United 
Kingdom  are  driven  by  American-made 
motors.  When  the  English  postal  authori- 
ties entered  the  telephone  field,  no  English 
firm  could  supply  the  number  of  instruments 
wanted,  and  the  contract  went  to  a  Chicago 
company.  England  is  the  home  of  cheap 
woollens,  but  our  manufacturers  of  ready- 
made  clothing  are  developing  an  important 
trade  there,  compensating  for  the  higher 
cost  of  their  cloth  and  the  larger  wages  of 
their  workmen  by  their  advantages  in  spe- 
cialized labor  and  superior  methods  and 
machines.  Our  car  builders,  who  have  so 
specialized  the  building  of  freight-cars  that 
the  rough  timber  goes  in  at  one  end  of  the 
workshop  and,  almost  under  the  eye  of  the 
spectator,  comes  out  at  the  other  end  a  fin- 
ished car,  found  an  easy  market  in  compe- 
tition with  old-fashioned  methods  and  hand 
labor.  It  is  only  within  a  few  months  that 
there  have  been  in  any  English  shop  ma- 
chines for  boring  square  holes  such  as  enable 
our  car  manufacturers  rapidly  to  mortise 
timbers  in  car  construction.  The  work  that 
is  done  in  an  instant  with  a  whirl  of  flying 
chips  was  laboriously  bored  and  chiselled 
out  by  hand  by  the  English  workers.  The 
same  advantage  in  labor-saving  wood-work- 
ing machines  enables  us  to  send  finished 
wood-work,  sash  and  doors,  for  buildings 
182 


"  Commercial  Invasion  "  of  Europe 

at  prices  which  cannot  be  equalled  in  the 
English  shops. 

Instead  of  enumerating  the  fields  in  which 
we  have  met  with  competitive  success,  it  will 
be  more  profitable  to  analyze  in  some  meas- 
ure the  reasons  for  our  strength  and  for 
Great  Britain's  industrial  weaknesses.  A 
few  weeks  ago  I  was  at  a  dinner  in  London 
at  which  was  gathered  a  group  of  men  rep- 
resentative of  British  industrial  and  com- 
mercial life.  The  conversation  was  on 
American  competition,  and  at  the  conclusion 
of  the  discussion  the  views  of  these  men  were 
summed  up  in  a  conclusion  with  which  all 
agreed,  and  their  verdict,  I  suppose,  may  be 
taken  in  the  main  as  representing  the  best 
commercial  judgment  in  Great  Britain.  All 
agreed  that  there  is  a  serious  crisis  in  British 
industry,  and  they  grouped  the  main  reasons 
for  it  under  three  heads.  The  first  is  the 
attitude  of  the  English  workman  in  his 
desire,  made  effective  by  the  power  of  trades- 
unionism,  to  restrict  the  output  of  labor  to 
the  lowest  possible  unit  per  man ;  the  second 
is  the  conservativeness  of  employers  and  the 
hostility  of  workmen  toward  the  introduc- 
tion of  labor-saving  machinery;  and  the 
third  is  "  municipal  trading,"  a  phrase  which 
we  have  not  encountered  much  at  home,  but 
which  means  the  activities  of  municipalities 
in  industrial  undertakings,  such  as  the  devel- 

183 


Business  and  Education 

opment  of  systems  of  transportation  and 
communication,  the  production  of  light  and 
heat,  in  a  word  the  municipal  control  of  the 
utilities.  On  this  last  point  there  would 
undoubtedly  be  found  wide  differences  of 
opinion  among  high  authorities,  and  it  is 
not  my  purpose  here  to  enter  into  a  discus- 
sion of  the  questions  involved  in  it.  In 
regard  to  the  first  two,  however,  I  believe 
there  is  pretty  unanimous  agreement  in  the 
minds  of  trained  observers  of  the  conditions 
of  industrial  affairs. 

The  highest  development  of  labor-unions 
has  been  in  Great  Britain.  Much  of  the 
earlier  growth  of  these  organizations  was 
along  correct  economic  lines,  resulted  in  dis- 
tinct benefit  to  organized  labor,  and  was 
undoubtedly  helpful  to  British  industries 
generally.  A  few  years  ago  there  came  into 
existence  a  new  unionism,  which  meant  a 
unionism  of  force,  a  unionism  which  carried 
its  points  by  strikes,  and  made  strikes  effec- 
tive by  forcible  interference  with  non-union 
labor.  That  new  unionism  has  lately  been 
succeeded  by  a  newer  unionism,  which  has  a 
false  economic  theory  for  its  foundation, 
and  is,  I  believe,  more  than  any  other  single 
cause,  the  influence  to  which  can  be  attrib- 
uted the  present  unhappy  state  of  British 
industry. 

British  trades-unions  embrace  nearly 
184 


"  Commercial  Invasion  "  of  Europe 

2,000,000  members.  The  greater  part  of 
this  army  of  organized  labor  has  adopted 
a  false  economic  theory.  They  hold  that 
there  is  a  given  amount  of  work  to  be  done 
in  Great  Britain,  and  that,  if  the  day's  out- 
put of  the  individual  worker  is  decreased, 
the  result  will  be  an  increase  in  the  aggre- 
gate number  of  days'  labor.  They  might 
not  all  of  them  state  the  proposition  in  just 
that  way,  but  the  irresistible  logic  of  their 
position  carries  them  to  exactly  that  point. 
It  is  a  cardinal  principle  with  the  members 
of  most  of  the  labor-unions  in  England  to- 
day that  it  is  desirable  for  them  to  produce 
with  each  day's  work  as  small  an  output  per 
man  as  it  is  possible  to  compel  employers 
to  accept.  They  believe  that  if  a  man  does 
only  half  a  given  amount  of  work  in  a  day, 
two  men  will  have  to  be  employed  where 
one  was  before,  or  the  job  will  furnish  em- 
ployment for  the  one  for  double  the  length 
of  time.  They  have  the  further  uneconomic 
principle  of  a  minimum  wage,  which  is  to  be 
paid  to  all  men  employed,  without  regard 
to  the  relative  value  of  their  labor.  Here  is 
how  the  situation  is  viewed  by  high  English 
authority:  With  the  principle  of  the  mini- 
mum wage  is  conjoined  the  principle  that 
there  shall  be  no  maximum  wage ;  that  is  to 
say,  if  any  workman  shall  induce  his  em- 
ployer to  offer  him  higher  wages  than  his 

185 


Business  and  Education 

fellows,  they  at  once  demand  that  the  same 
increased  wages  shall  be  paid  to  all  of  them 
alike.  If  the  master  seeks  refuge  in  im- 
proved machinery,  the  principles  of  limita- 
tion of  output  and  minimum  wage  are  still 
enforced.  The  machine  must  not  be  allowed 
to  do  all  it  can,  any  more  than  the  men ;  nor 
may  it  have  an  attendant,  however  simple 
his  duties,  at  any  lower  rate  of  wages  than 
that  fixed  for  the  skilled  artisan  who  did  the 
work  before  the  machine  was  introduced. 
The  machine,  in  short,  must  not  increase  out- 
put or  displace  labor.  It  is  broadly  argued 
that  men  will  work  their  best  if  it  is  made 
worth  their  while,  and  not  otherwise,  but 
the  unions  say  it  shall  not  be  made  worth 
their  while.  It  is  not  worth  the  while  of  a 
bad  workman  to  do  better,  for  his  mini- 
mum wage  is  secure.  It  is  not  worth  the 
while  of  the  good  workman  to  put  forth  his 
strength  or  skill,  for  he  would  incur  odium 
among  his  class  and  could  not  get  increased 
wages  in  return. 

It  hardly  seems  credible  that  the  great 
mass  of  organized  labor  in  England  should 
be  so  blind  to  plain  economic  truths  as  to 
believe  that  their  country  can  maintain  its 
commanding  position  in  the  world's  com- 
petitive markets  when  labor  uses  its  keenest 
ingenuity  and  best  endeavors  to  devise 
ways  to  restrict  individual  production.  In- 
i86 


"  Commercial  Invasion  "  of  Europe 

stances  can  be  produced  indefinitely  to  sup- 
port the  assertion  that  such  is  their  belief. 
Such  instances  will  show  quotations  from 
the  rules  of  the  organizations,  which  are 
devised  to  restrict  labor  and  discourage  en- 
ergetic workmen.  There  are  many  examples 
of  direct  official  discipline  of  members  who 
have  shown  a  tendency  to  turn  out  more 
work  in  a  day  than  the  minimum  which 
employers  can  be  forced  to  accept.  I  have 
heard  of  many  cases  where  men  of  ambition 
and  energy,  who  found  it  difficult  to  adapt 
themselves  to  the  easy-going  pace  which  the 
union  prescribes,  got  very  much  the  worst 
of  it  in  the  contest  which  always  follows  a 
period  of  active  work.  Men  who  start  in  to 
turn  out  a  full  day's  work  are  frequently 
directly  disciplined  by  their  unions;  but  if 
it  does  not  reach  that  point,  they  are  at  least 
at  once  put  under  a  social  boycott.  They 
are  called  "  sweaters  "  and  "  masters'  men," 
and  much  ingenuity  goes  into  the  devising 
of  ways  and  means  to  make  their  lives  mis- 
erable and  their  positions  untenable. 

Some  of  the  notable  illustrations  of  the 
spirit  of  curtailment  of  production  are  found 
in  the  building  trades.  Bricklayers  in  Lon- 
don, for  instance,  do  not  average  over  400 
bricks  a  day ;  those  employed  by  the  London 
County  Council  on  public  work  lay  materi- 
ally less.  When  it  is  understood  that  an 
187 


Business  and  Editcation 

active  man  can  readily  lay  looo  bricks  a 
day,  and  from  that  up  to  1600  it  will  be 
seen  what  a  disastrous  grip  this  "  go-easy  " 
policy  has.  We  have  made,  with  our  ex- 
portations  running  into  millions  of  dollars, 
great  inroads  on  the  English  boot  and  shoe 
industry.  Some  of  that  success  can  be  ac- 
counted for  by  superior  machinery  and  better 
organization  and  division  of  labor,  but  it  is 
not  surprising  to  find  in  this,  as  in  a  good 
many  other  fields  where  we  have  made  pro- 
nounced competitive  progress,  that  there  is 
a  clear  understanding  in  the  trades-unions 
controlling  the  manufacture  of  boots  and 
shoes  that  a  day's  work  shall  be  limited  to 
a  certain  quantity,  and  that,  should  a  man 
do  more,  his  life  will  be  made  intolerable. 
The  delusion  which  the  English  workman 
has  harbored,  that  there  is  a  certain  amount 
of  work  to  be  done  in  that  industry,  and 
that  if  every  one  tries  to  do  as  much  as 
he  can  there  will  not  be  work  enough 
to  go  around,  has  led  him  to  the  natural 
result  of  such  a  fallacy.  Chicago  factories, 
usually  paying  wages  from  two  to  three 
times  as  high  as  are  ruling  in  the  English 
factories,  are  sending  enormous  exports  into 
the  English  field.  Those  exports  two  years 
ago  were  a  little  over  $500,000 ;  a  year  ago 
they  passed  the  million,  and  last  year  they 
were  well  on  toward  $2,000,000. 
188 


"  Commercial  Invasion  "  of  Europe 

Both  English  builders  and  workmen  are 
having  a  most  valuable  object-lesson  in  the 
construction  of  the  great  manufacturing 
plant  of  the  British  Westinghouse  Company. 
This  company  is  building  a  $5,000,000  plant 
at  Manchester,  in  which  electrical  machines 
of  American  model  are  to  be  built  by  Ameri- 
can methods.  One  of  the  finest  mechanical 
plants  in  the  world  is  being  installed,  and 
the  manner  in  which  the  building  operations 
have  been  pushed  forward  have  been  the 
marvel  of  both  English  builders  and  work- 
men. The  plant  was  started  under  English 
supervision,  but  the  work  dragged  along  in 
such  hopeless  fashion  that  the  task  of  com- 
pleting it  was,  last  April,  put  into  the  hands 
"^f  American  building  contractors.  They 
spent  $3,000,000  in  eight  months,  and  man- 
aged, though  under  great  difficulty,  to  show 
a  rapidity  of  construction  such  as  England 
had  probably  in  all  her  history  never  before 
seen.  These  contractors  met  with  the  same 
spirit  among  the  English  bricklayers  that 
is  to  be  found  everywhere.  With  all  their 
energy  they  could  not  get  them  up  above 
800  bricks  a  day,  so  they  imported  some 
American  bricklayers  and  set  them  at  work 
on  the  slowly  rising  walls.  They  laid  nearly 
2000  bricks  a  day.  The  pride  of  the  Eng- 
lish workmen  was  at  stake,  and  they  aban- 
doned their  "  go-easy  "  principles,  took  off 
189 


Business  and  Education 

their  coats,  and  demonstrated  that  they  were 
as  good  bricklayers  as  the  imported  Ameri- 
cans, but  how  they  will  reconcile  the  record 
that  they  made  under  the  eyes  of  the  St. 
Louis  contractors  with  what  they  are  willing 
to  do  under  English  superintendence  is  a 
little  difficult  to  say. 

In  the  coal-mining  industry  this  fallacious 
policy  of  trades-unionism  takes  the  form  of 
"  stop  days,"  when  all  the  miners  stop  work 
without  respect  to  the  views  of  the  mine- 
owners  because  they  believe  that  by  so  doing 
they  will  restrict  production,  hold  up  prices, 
and  so  keep  up  their  own  wages,  which  are 
regulated  by  a  sliding  scale  based  on  the 
price  of  coal.  Their  economics  have  not 
been  broad  enough  to  grasp  the  prospect  of 
American  competition,  but  their  methods  are 
hastening  its  success. 

Since  the  great  machinists'  strike  of  a  few 
years  ago  conditions  in  that  trade  are  some- 
what better  than  before  that  dispute,  which 
ended  so  disastrously  for  organized  labor. 
There  are  still  many  restrictions  imposed 
upon  manufacturers  which  prevent  them 
from  securing  anything  like  the  best  re- 
sults from  the  machinery  they  introduce. 
Throughout  the  mechanical  trade  the  same 
false  notion  that  the  less  work  a  man  does 
in  a  day  the  more  he  leaves  to  be  done  by 
himself  or  his  fellows  is  particularly  aimed 
190 


"  Commercial  Invasion  "  of  Europe 

against  labor-saving  machinery,  and  every 
rule  the  unions  can  devise  to  restrict  the  out- 
put of  machinery  and  increase  the  labor  cost 
is  considered  by  the  unions  their  material 
gain. 

The  second  serious  embarrassment  in 
which  British  industries  are  involved  is  the 
difficulty  surrounding  the  introduction  of 
modern  labor-saving  machines  and  mechan- 
ical methods.  In  the  way  of  that  improve- 
ment is  the  double  obstacle  of  the  conserva- 
tiveness  of  employers  and  the  opposition  of 
the  men.  Every  one  who  has  studied  the 
English  industrial  situation  will  agree  unre- 
servedly that  labor-saving  machinery  must 
be  extensively  introduced,  that  the  manufac- 
turing plants  must  be  put  on  mechanical 
equality  with  those  of  America  and  Ger- 
many, before  the  English  manufacturers  can 
hope  again  to  produce  at  as  low  a  unit  of 
labor-cost  as  is  done  in  the  two  competing 
countries. 

Conservatism  is  a  corner-stone  of  the 
English  character,  and  it  seems  particularly 
pronounced  in  some  of  the  families  which 
have  hereditarily  been  in  control  of  manu- 
facturing industries.  A  machine  that  did 
satisfactory  service  for  a  man's  father  and 
grandfather  comes  to  be  regarded  with  a 
certain  veneration.  With  us  there  is  no 
recommendation  better  than  that  a  machine 
191 


Business  and  Education 

or  method  is  new.  To  speak  to  a  manufac- 
turer of  a  new  machine  or  a  new  process 
interests  him  at  once.  His  mind  is  open  to 
investigate  any  improvement  that  is  sug- 
gested, and,  what  is  still  more  important,  he 
has  the  courage  when  the  value  of  the  im- 
provement is  demonstrated,  to  throw  upon 
the  scrap-heap  machinery  that  may  have 
cost  him  much,  and  to  replace  it  with  ma- 
chinery which  will  accomplish  more. 

The  mind  of  the  English  manufacturer 
does  mot  work  along  these  lines.  As  a  rule 
he  has  a  deep-seated  prejudice  against  a 
thing  that  is  new ;  it  is  not  easy  to  win  him 
over  to  an  examination  of  a  new  machine 
or  method,  and  it  is  always  difficult  to 
induce  him  to  consign  to  the  scrap-heap 
machines  which  have  for  years  done  him 
good  and  profitable  service. 

The  characteristics  of  conservatism  that 
made  the  English  business  man  for  years 
combat  the  introduction  of  the  typewriter, 
the  conservatism  which  to-day  will  not  per- 
mit a  telephone  within  the  sacred  precincts 
of  the  Bank  of  England,  has  in  its  operation 
in  the  industrial  field  cost  England  dear. 

Only  the  smaller  part  of  the  difficulty  is 
over  when  the  manufacturer  has  grasped  the 
necessity  for  introducing  a  machine.  His 
workmen  are  more  prejudiced  than  he 
against  mechanical  innovations.  They  may 
192 


"  Commercial  Invasion  **  of  Europe 

have  seen  many  examples  of  machines 
which,  though  first  taking  away  the  neces- 
sity for  hand  labor,  in  the  end  create  far 
more  opportunity  for  labor  than  at  first 
existed,  but  those  examples  have  failed  to 
impress  them.  It  is  only  with  the  greatest 
difficulty  that  labor-saving  machines,  abso- 
lutely essential  to  the  continuance  of  manu- 
facturing establishments  in  a  position  to 
meet  international  competition,  can  be  put 
into  operation  in  the  English  workshops. 
Men  sometimes  refuse  altogether  to  operate 
machines.  The  unions  enforce  restrictions 
in  regard  to  the  number  of  automatic  ma- 
chines that  one  workman  will  be  permitted 
to  attend.  They  go  on  strike  because  non- 
union labor  is  put  at  work,  and  they  hamper 
and  embarrass  in  a  hundred  ways  the  manu- 
facturer who  wishes  to  provide  modern 
equipment. 

All  that  looks  unreasonable  at  first,  but 
the  antagonistic  attitude  of  English  work- 
ingmen  toward  labor-saving  machinery  can 
be  better  understood  when  some  of  the  other 
restrictions  of  English  labor  organizations 
are  comprehended.  Each  trades-union,  be- 
lieving there  is  a  definite  amount  of  work  to 
do,  and  hoping  to  confine  all  of  it  of  a  par- 
ticular character  to  its  own  members,  has 
hedged  about  entrance  into  each  trade  with 
the  greatest  of  difficulties.     The  result  is 

'3  193 


Business  and  Education 

that  there  is  in  England  the  least  possible 
mobility  of  labor.  A  man,  having  learned 
one  trade,  finds  it  almost  impossible  to  draw 
out  of  that  and  enter  another.  There  are 
minute  restrictions  regarding  apprentices, 
and  the  rules  provide  fines  and  disciplines 
for  any  member  who  teaches  an  outsider  or 
permits  him  to  use  tools  or  in  any  way  aids 
him  in  learning  the  rudiments  of  a  trade. 
When  this  is  understood  it  will  be  seen  how 
serious  is  the  position  of  an  English  work- 
man, if  his  place  be  menaced  by  the  intro- 
duction of  labor-saving  machinery  which 
might  force  him  to  seek  employment  in  some 
other  trade. 

Conditions  as  they  have  been  evolved 
under  the  rule  of  the  walking  delegate  and 
of  labor  leaders  with  the  shallowest  notions 
of  economics  are  the  despair  of  Englishmen 
who  hope  to  see  their  country  win  back  a 
lost  industrial  position.  Those  conditions 
are  most  profitable  subjects  for  study  by  us. 
We  have  the  beginnings  of  just  the  sort 
of  unionism  which,  in  its  full  development, 
has  brought  distressing  results  on  England. 
There  cannot  be  found  in  Great  Britain  any 
more  absurd  regulations  restricting  the  out- 
put of  labor  than  were  in  force  in  the  build- 
ing trades  in  Chicago  for  two  years,  ending 
in  paralyzing  the  building  industry  there. 
We  have  already  grown  accustomed  to  the 
194 


"  Commercial  Invasion  **  of  Europe 

strike  which  has  for  its  object,  not  an  in- 
crease of  wages  or  a  reduction  of  hours,  but 
the  imposition  of  restrictive  regulations 
which  would  result  in  a  decreased  product. 
So  long  as  our  industries  can  go  forward 
receiving  the  generous  co-operation  of  labor 
which  is  still  the  rule,  we  will  have  an  advan- 
tage over  the  countries  of  Europe  in  spite  of 
a  wage-scale  more  than  double  theirs,  but 
that  advantage  will  be  menaced  if  the  false 
conceptions  which  now  rule  most  of  the 
English  labor  organizations  are  ever  gener- 
ally adopted  by  our  own  workers. 

When  we  turn  to  the  statistics  of  trade 
between  the  United  States  and  France,  we 
find  a  condition  in  sharp  contrast  to  that 
shown  by  the  English  trade  returns.  France 
has  hardly  heard  of  the  American  invasion. 
Her  sales  last  year  stood  at  almost  the  same 
point  that  they  did  ten  years  ago.  Our  sales 
to  France  during  the  same  period  have 
shown  some  increase,  but  taking  the  record 
of  last  year  and  comparing  it  with  ten  years 
ago  the  increase  is  but  $18,000,000,  while 
we  remember  that  our  annual  sales  to  Eng- 
land increased  in  the  last  half  dozen  years 
$244,000,000.  France  has  done  everything 
she  can  with  a  high  protective  tariff  to  make 
competition  difficult  to  foreign  manufac- 
turers. She  has  done  even  more  than  that, 
with  legislation  which  has  in  some  instances 

195 


Business  and  Education 

made  foreign  competition  impossible  with- 
out any  regard  to  price.  The  franchises 
which  have  recently  been  granted  to  many 
electric  railways  have  provided  that  all  mate- 
rial for  their  construction  and  equipment 
must  originate  and  be  manufactured  in 
France. 

The  exports  of  France  are  in  the  main  of 
a  kind  that  is  not  affected  by  the  underbid- 
ding of  foreign  makers.  French  deftness, 
that  artistic  touch  which  the  workers  of  few 
other  nations  can  equal,  gives  a  permanence 
to  her  hold  on  those  foreign  markets  in  which 
she  is  interested  which  has  been  little  affected 
by  those  industrial  developments  that  have 
made  such  profound  impression  upon  the 
trade  relations  among  England,  Germany, 
and  the  United  States.  In  ponderous  lines 
of  manufacturing  we  have  reached  unques- 
tioned superiority  over  France,  but  the  same 
sort  of  skill  which,  in  the  fingers  of  the 
Parisian  workingwomen  produces  articles 
of  unapproachable  attractiveness,  develops 
in  the  hands  of  the  mechanic  into  a  deftness 
which  rivals  the  ingenuity  of  our  best  work- 
men, and  leaves  us  without  the  advantage 
in  the  French  market  that  we  have  in  most 
of  the  other  markets  of  the  world. 

Russia  is  another  country  which,  in  spite 
of  its  enormous  extent,  its  important  posi- 
tion in  the  world's  politics,  and  the  tradi- 

196 


"  Commercial  Invasion  "  of  Europe 

tionally  friendly  relations  between  its  peoples 
and  our  own,  has  been  little  affected  by  the 
"  American  invasion."  With  territory  cov- 
ering an  eighth  of  the  globe,  and  a  popula- 
tion of  130,000,000,  the  trade  between  this 
greatest  of  political  units  and  our  own 
country  is  still  comparatively  insignificant, 
and  has  in  the  last  decade  shown  no  remark- 
able changes.  Our  exports  have  shown  no 
significant  increase.  Russia  is  a  country  of 
high  tariff,  and  the  tendency  is  toward 
greater  protective  restrictions  about  her  do- 
mestic industries.  That  policy  has  resulted 
in  a  number  of  American  manufacturers 
building  important  plants  within  the  empire, 
but  it  has  effectually  prevented  any  remark- 
able development  in  our  grasp  of  the  Russian 
markets. 

I  asked  M.  de  Witte,  the  Russian  Finance 
Minister,  how  in  his  opinion  commercial 
relations  between  the  United  States  and 
Russia  could  be  improved. 

"  Practically,  there  is  nothing  that  can  be 
done,"  he  said.  "  Theoretically,  there  are 
unlimited  possibilities.  If  you  only  had  a 
government  that  could  do  things  as  our  gov- 
ernment can,  a  combination  of  the  two 
countries  would  bring  Europe  to  our  feet. 
We  could  absolutely  control  the  markets  of 
the  world  for  meat,  bread,  and  light.  I 
understand,  of  course,  that  that  is  impossible 
197 


Business  and  Ediication 

—  impossible  from  your  side.  We  could  do 
it,  but  you,  with  your  government,  which 
must  always  listen  to  the  people  and  shape 
its  course  for  political  reasons,  could  not." 

It  is  possible  that  the  unattainableness  of 
political  unity  of  action  which  the  distin- 
guished Russian  deprecated  may  in  effect  be 
in  some  measure  worked  out  by  the  com- 
binations —  the  industrial  trusts  —  which 
have  such  great  influence  in  various  fields 
and  which  are  able  to  project  into  the  com- 
mercial battle  such  effective  unified  efforts. 
European  economists  and  industrial  leaders 
are  undoubtedly  more  alarmed  over  the  ad- 
vantages which  they  see  we  are  attaining 
by  the  aid  of  these  great  organizations  than 
over  any  other  point  in  our  position. 

I  have  attempted  in  these  articles  to  out- 
line some  of  the  weaknesses  of  our  foreign 
competitors  and  some  of  the  corresponding 
points  of  strength  that  have  developed  in 
our  own  industries.  The  list  of  our  advan- 
tages is  an  imposing  one,  but  we  cannot 
expect  that  all  of  them  will  be  maintained. 
Our  competitors  are  by  no  means  blind  or 
without  energy  or  ability.  fThe  superiority 
of  our  labor,  our  larger  use^'of  machinery, 
our  low  taxation  and  small  military  burden, 
the  homogeneity  of  our  people,  and  the 
great  breadth  of  the  domestic  field  of  con- 
198 


•    "  Commercial  In'vasion  "  of  Europe 

sumption,  our  comparative  freedom  from 
militant  trades-unionism,  the  omnipotence 
with  us  of  the  industrial  ideal,  our  freedom 
from  a  caste  which  in  other  countries  pre- 
vents the  best  brain  and  the  most  highly 
trained  intellect  from  engaging  in  industrial 
enterprise  —  all  these  are  advantages  which, 
so  long  as  they  hold  good,  make  a  broad 
foundation  upon  which  to  rest  an  industrial 
development  of  commanding  importance.! 
But  unless  the  United  States  has  some  more 
permanent  and  fundamental  advantage,  I 
should  lack  the  absolute  faith  which  I  now 
have  in  our  development  to  a  lasting  com- 
mercial supremacy.  No  small  part  of  our 
great  exports  in  the  last  few  years  has  been 
made  up  of  labor-saving  machines,  which 
have  at  once  been  turned  against  us  as  guns 
captured  from  an  enemy.  From  all  over 
Europe  deputations  of  technical  experts  are 
journeying  to  the  United  States  and  taking 
abundant  advantage  of  our  good-nature  and 
hospitality.  They  praise  our  machines  and 
make  drawings  of  them;  they  satisfy  our 
pride  with  appreciations  of  our  methods  and 
they  make  copious  notes.  The  result  is  be- 
ginning to  be  seen  in  many  of  the  workshops 
of  Europe. 

There  can  be  no  American  monopoly  of 
ideas.  Civilization  gives  no  patent  on  tech- 
nical   supremacy.      America   may    lead    the 

199 


Btisi/ness  and  Education 

world  now  in  her  ingenious  application  of 
labor-saving  machinery,  but  there  can  be  no 
assurance  of  the  permanent  continuance  of 
that  advantage.  Nor  can  assurance  be  given 
that  American  industrial  society  will  always 
remain  as  mobile  and  as  energetic  as  it  is  at 
present.  We  have  already  seen  trades- 
unions  attempting  to  force  employers  to 
make  work  rather  than  to  produce  wealth. 
We  have  seen  strikes  that  have  had  for  their 
basis  only  a  desire  for  an  increased  power 
of  interference,  and  from  that  it  is  not  a 
long  step  to  a  position  where  union  labor 
may  be  found  struggling  to  restrict  indi- 
vidual production.  Strikes  of  that  charac- 
ter have  so  far  been  successfully  combated, 
but  whatever  there  is  left  of  the  spirit  that 
animated  them  remains  a  menace  to  Ameri- 
can prosperity. 

In  our  national  conception  of  the  dignity 
of  work  we  have  an  enormous  advantage, 
but  that  also  may  be  in  danger.  Thus  far 
industrial  rewards  have  been  made  pretty 
strictly  on  a  merit  basis.  There  have  been 
few  sons  and  nephews  of  rich  families  to  be 
taken  care  of.  The  future  generation  can 
hardly  be  so  free  from  nepotism  in  indus- 
trial promotion.  With  the  increase  of 
wealth  we  have  already  the  beginning  of  a 
leisure  class,  and  it  is  not  certain  that  indus- 
trial and  commercial  life  can  continue  to 

200 


"  Commercial  Invasion  "  of  Europe 

command  the  full  service  of  the  best  brain 
and  energy  that  we  have.  Our  military 
burdens  may  increase  if  we  measure  up  to 
the  full  extent  of  our  responsibilities  as  a 
world-power.  Tariff  walls  may  be  built 
against  us. 

On  all  these  points  of  present  superiority 
we  can  have  but  small  assurance  of  a  lasting 
industrial  supremacy,  but  I  feel  that  a  more 
fundamental  reason  for  belief  in  such  su- 
premacy can  be  advanced,  one  which  will 
warrant  the  conclusion  that  America  must 
inevitably  lead  the  world  in  the  twentieth- 
century  commercial  struggle. 

Of  all  nations  the  United  States  has  the 
most  unbounded  wealth  of  natural  resources. 
We  have  hardly  comprehended  the  inevi- 
table advantages  which  those  resources  are 
to  give  us. 

Man's  labor  the  world  over  is  steadily 
decreasing  in  importance.  It  is  the  age  of 
machinery.  The  forces  of  nature  are  to  do 
man's  work.  All  the  world  over  the  cost  of 
production  has  fallen.  The  relative  impor- 
tance of  labor  in  the  cost  of  production  is 
lessening ;  the  sway  of  machinery  is  increas- 
ing. The  twentieth  century  will  be  the  cen- 
tury of  machinery.  Before  it  is  half  com- 
pleted we  may  expect  to  see  that  sort  of 
human  labor  that  is  the  painful  and  labori- 
ous exercise  of  muscle  almost  supplanted  by 

201 


Business  and  Education 

automatic  machinery  directed  by  trained  in- 
telligence. Such  development  of  machine 
production  steadily  increases  the  impor- 
tance of  raw  material  in  the  productive 
process.  As  the  proportion  of  labor  cost 
decreases,  the  cost  of  the  raw  material  forms 
a  larger  part  of  the  value  of  the  finished 
product. 

The  hand-weaver  took  a  pound  of  cotton 
and  spent  a  week  in  its  manipulation.  The 
cloth  had  to  reimburse  not  only  the  cost  of 
the  pound  of  cotton,  but  six  days  of  toil. 
Machinery  was  introduced  into  the  industry, 
a  week  became  an  hour,  and  a  hundred  yards 
took  the  place  of  one.  The  price  of  each 
yard  then  had  to  pay  the  merest  fraction  of 
the  cost  of  the  labor  which  watched  the 
looms.  The  proportion  which  the  cost  of 
the  raw  material  bore  to  the  cost  of  the  fin- 
ished product  enormously  increased.  So, 
under  these  modern  conditions  of  manufac- 
turing industry,  where  machinery  enters 
more  and  more  into  the  manipulation,  and 
the  cost  of  labor  forms  a  constantly  decreas- 
ing relation  to  the  whole,  raw  material  comes 
to  play  a  more  and  more  important  part. 
When  machinery  has  fully  entered  into  pro- 
duction, the  cost  of  the  crude  products  makes 
up  the  major  portion  of  the  cost  of  the  fin- 
ished article.  We  can  in  a  measure  reduce 
the  cost  of  raw  material  by  improved  meth- 

202 


"  Commercial  Invasion  "  of  Europe 

ods  in  production  and  in  transportation. 
The  steam  hoist  and  electric  drill  in  the 
mine,  the  steam  harvester  and  the  steam 
plough  on  the  farm,  the  mogul  engine  and 
the  fifty-ton  car,  fast  steamships  of  huge 
tonnage,  have  all  greatly  reduced  the  price 
of  raw  material.  But  no  matter  how  strong 
the  appeal.  Mother  Nature  yields  a  slow  and 
grudging  consent  to  the  efforts  of  her 
children  to  relax  her  grip.  Man's  success 
in  cheapening  raw  material  must  always 
fall  short  of  achievements  in  the  realm  of 
manufacture. 

Since  the  cost  of  material  is  an  increasing 
part  of  the  price  of  the  product,  those  pro- 
ducers who  can  draw  upon  practically  inex- 
haustible and  rich  supplies  near  at  hand, 
who  are  not  obliged  to  work  poor  ores  and 
poor  lands,  or  to  transport  materials  great 
distances  —  the  producers  and  the  nation 
with  those  blessings  are  at  tremendous  ad- 
vantage when  compared  with  others  whose 
supplies  of  material  are  less  rich  and  less 
advantageously  located. 

The  age  of  machinery  is  also  the  age  of 
motive  power,  which  is  but  another  way  of 
saying  that  it  is  the  age  of  coal.  The  nation 
which  has  the  cheapest  raw  material  and  the 
cheapest  coal  has  a  permanent  and  predomi- 
nant advantage  in  the  world's  markets,  and 
it  is  an  advantage  which  every  improvement 

203 


Business  and  Education 

in  method  of  manufacture  will  only  serve  to 
emphasize. 

When  so  much  is  admitted,  the  conclu- 
sion immediately  follows  that  America's 
industrial  future  is  secured.  The  United 
States  has  the  most  abundant  and  the  cheap- 
est raw  materials  and  supplies  of  fuel  in  the 
world.  Germans  and  Englishmen  may  dis- 
pute with  us  over  relative  advantages  in 
methods,  in  machinery,  in  labor,  in  business 
organization,  and  in  commercial  practice. 
They  may  claim  that  they  have  much  to 
teach  us  and  that  they  can  soon  learn  what 
we  have  to  teach  them.  American  labor  may 
contract  the  disease  of  trades-unionism,  and 
American  public  burdens  and  social-caste 
developments  may  lessen  our  advantage, 
but  American  soil  and  minerals  are  eternal, 
and  the  resources  of  no  other  great  power 
are  for  one  moment  to  be  compared  with 
them. 


204 


THE    INDUSTRIAL    FUTURE 

An  address  delivered  before  the  American  Bankers' 
Association,  Washington,  October  ii,  1905. 

With  almost  unmixed  satisfaction  the  mem- 
bers of  the  American  Bankers'  Association 
may  contemplate  the  progress  of  financial 
events  during  the  year  which  has  elapsed 
since  their  last  meeting.  Little  short  of  be- 
wildering is  the  array  of  statistics  which 
could  be  presented  to  demonstrate  the  rapid 
growth,  sound  development,  and  satisfactory 
progress  made  in  the  commercial,  financial, 
and  industrial  fields.  It  is  safe  to  assert  that 
never  before  was  our  population  so  fully 
employed.  Never  before  was  the  general 
level  of  wages  so  high,  never  before  has  the 
aggregate  volume  of  industry  been  as  great 
as  it  is  to-day,  never  was  the  future  of  indus- 
trial activity  so  fully  assured  by  advance 
orders.  Never  was  the  measure  of  commer- 
cial activity  so  large,  and  never  before  did 
such  bountiful  harvests  meet  such  eager 
markets. 

The  total  value  of  the  agricultural  crop  of 

the  United  States  will  this  year  exceed  by 

$500,000,000  the  average  value  of  that  crop 

during  the  last  ten  years.    The  money  value 

205 


Business  and  Education 

on  the  farms  of  this  season's  crop  will  reach 
the  staggering  total  of  $3,000,000,000.  You 
of  the  West  and  South  are  close  to  the 
true  meaning  of  these  figures.  To  eastern 
bankers  such  statistics  are  merely  figures. 
Their  aggregate  is  so  vast  that  it  is  difficult 
to  comprehend  their  true  import.  You  who 
are  closer  to  the  fields,  the  granaries  and  the 
cotton  presses,  you  who  with  yoin*  own  eyes 
see  the  direct  results  of  this  flood  of  wealth, 
are  more  competent  to  comprehend  its 
significance. 

Under  the  influence  of  harvests  less  boun- 
tiful than  this,  following  one  another  with 
providential  regularity,  in  the  last  half  dozen 
years,  you  have  seen  whole  communities 
change  in  character.  People  whose  only 
acquaintance  with  finance  was  their  knowl- 
edge of  mortgage  payments  made  to  absent 
creditors  have  been  converted  into  common- 
wealths with  surplus  capital  and  investment 
capacity. 

The  whole  great  Mississippi  Valley  gives 
promise  that  at  some  day,  distant  perhaps, 
it  will  be  another  New  England  for  invest- 
ments. There  is  a  developing  bond  market 
there  which  is  a  constant  astonishment  to 
eastern  dealers.  You  have  seen  the  farmer 
in  these  half  dozen  years  discover  the  uses 
of  a  bank  account,  deposit  his  income,  pay 
off  his  mortgage,  accumulate  a  surplus  and 
206 


The  Industrial  Future 

actually  become  an  investor  in  corporate 
securities.  You  have  seen  that  sort  of  thing 
multiplied  and  repeated  until  the  aggregate 
v^ealth  of  the  western  and  southern  States 
has  become  astounding,  even  to  you  who 
have  taken  an  active  part  in  its  growth. 

Now  on  top  of  these  succeeding  years  of 
good  harvests,  good  prices,  intelligent  liqui- 
dation of  debts  and  thrifty  accumulation  of 
surplus,  comes  the  unprecedented  figures  of 
the  value  of  this  season's  crop  yield.  Surely 
America  is  a  country  blessed. 

The  feature  of  agricultural  life  in  these 
recent  years  has  been  great  income,  dimin- 
ishing liabilities  and  the  provision  of  ample 
working  capital,  with  all  the  economies  and 
advantages  which  ample  working  capital 
provides.  These  conditions  have  worked 
marvels  in  the  way  of  prosperity  for  the 
agricultural  communities.  But  prosperity 
is  not  confined  to  the  farms.  These  same 
influences  —  large  income,  diminishing  lia- 
bilities and  the  provision  of  ample  working 
capital  —  have  been  factors  in  the  industrial 
field  as  well ;  we  can  find  as  great  prosperity 
under  shop  roofs  as  in  the  fields.  The 
days  when  industrial  competition  commonly 
reached  a  point  of  destructive  severity  are 
largely  past.  The  days  when  narrowness  of 
outlook  and  lack  of  co-ordination  led  to  the 
wasteful  duplication  of  plants  and  a  vast 
207 


Busmess  and  Education 

unproductive  expenditure  of  capital,  have 
given  way  to  more  intelligent  management. 
That  destructive  competition,  that  duplica- 
tion of  unproductive  expenditure,  led  with 
unerring  economic  force  to  the  industrial 
combinations  which  marked  the  last  years 
of  the  century  recently  closed.  The  forces 
which  led  to  these  combinations  were  so 
irresistible  that  some  industries  were  swept 
together  under  hastily  considered  plans. 
Combinations  were  made  that  were  properly 
open  to  criticism.  Heterogeneous  elements 
were  united  in  ways  that  meant  inevitable 
friction.  Diverse  interests  were  brought 
together  that  could  not  in  a  day  be  harmon- 
ized. For  a  time  there  was  doubt  as  to 
whether  or  not  true  wisdom  had  been  shown 
by  the  men  who  formed  these  great  industrial 
combinations. 

Evidence  has  now  accumulated,  I  believe, 
to  warrant  an  answer  to  that  question.  We 
anticipated  economies  when  these  combina- 
tions were  made,  but  we  are  only  just  begin- 
ning to  understand  something  of  the  full 
advantage  which  may  result  from  the  na- 
tional organization  of  certain  industries.  It 
took  a  little  time  to  get  these  organizations 
running  smoothly.  It  was  not  easy  to  find 
men  with  the  broad  economic  insight  which 
the  management  of  such  great  enterprises 
required.  When  a  nation  meets  a  crisis  men 
208 


The  Industrial  Future 

seem  to  be  raised  up  ready  for  the  tasks. 
When  this  country  faced  war  we  produced 
great  miHtary  generals.  To-day,  when  the 
crisis  in  the  management  of  vast  industrial 
combinations  is  upon  us,  we  are  producing 
great  captains  of  industry.  These  managers 
are  not  all  great  administrators  any  more 
than  the  war  officers  were  all  great  com- 
manders, but  I  believe  the  world  has  never 
seen  the  parallel  of  the  business  genius  which 
is  coming  into  the  work  of  organizing  some 
of  these  great  industrial  combinations.  Econ- 
omies are  being  brought  about  that  were 
not  conceived  of  when  these  organizations 
were  formed.  The  co-ordination  of  a  whole 
field  of  industry,  the  organization  and  dis- 
tribution of  plants  so  that  the  industry  is 
working  under  the  least  possible  disadvan- 
tage in  respect  to  transportation  charges, 
the  combination  into  such  aggregates  that 
expenditures  may  be  made  to  effect  small 
savings,  or  in  introducing  mechanical  aids 
which  would  be  impossible  in  small  plants, 
but  which  on  a  large  scale  effect  remarkable 
economy  —  all  these  developments  are  an- 
swering the  question  as  to  the  wisdom  of 
these  combinations.  The  results  are  begin- 
ning to  appear  in  the  income  accounts  and 
balance  sheets.  The  improvement  there  fore- 
shadowed is,  I  believe,  but  an  indication  of 
what  may  yet  come. 
14  209 


Business  and  Education 

With  the  aid  of  a  wealth  of  raw  material 
and  a  genius  for  mechanicar  manipulation, 
we  developed  a  few  years  ago  a  capacity  for 
industrial  competition  which  startled  the 
world.  England,  whose  supremacy  had  been 
of  such  long  standing  that  she  rested  in 
serene  assurance,  was  crowded  out  of  some 
of  the  international  competitive  markets. 
She  was  crowded  to  second  place  by  America 
and  then  to  third  place  by  Germany.  Our 
exports  of  manufactures  doubled  and  doubled 
again  and  we  had  to  be  reckoned  with  in 
every  international  market. 

Then  came  a  halt.  Europe  awoke  to  the 
situation.  She  bought  samples  of  our  tools 
and  duplicated  them.  She  sent  an  army  of 
investigators  to  study  our  methods.  She 
arrested  us  in  our  commercial  conquest. 
That  halt  is  proving  to  have  been  only  tem- 
porary. Again  we  are  showing  unexampled 
totals  in  our  exports  of  manufactures.  The 
present  figures  are  substantially  exceeding 
the  totals  which  we  made  at  the  time  Europe 
coined  the  phrase,  "  a  commercial  invasion." 
The  reason  for  this  late  improvement,  this 
regaining  of  ground  temporarily  lost,  this 
making  of  new  records,  lies  in  the  perfection 
of  industrial  organization  which  has  been 
made  possible  by  the  great  combinations.  I 
believe  we  are  just  started  on  a  new  "  com- 
mercial invasion."     We  have  the  cheapest 

2IO 


The  Industrial  Future 

raw  material,  the  most  efficient  labor,  a  pre- 
eminent ability  in  the  adoption  of  mechanical 
aids;  and  all  that  is  combined  with  what  I 
believe  to  be  transcendent  genius  for  eco- 
nomic organization.  The  combination  of 
these  forces  will,  I  conceive,  be  well-nigh 
irresistible.  The  logic  of  this  combination 
spells  for  us  an  unexampled  development  of 
foreign  trade.  All  we  need  is  intelligently  to 
foster  the  possibilities.  I  am  not  giving  rein 
to  imagination.  The  cold  figures  of  Govern- 
ment statistics  show  the  beginning  of  this 
new  industrial  conquest.  Comparisons  of 
manufacturers'  cost  sheets  reveal  the  possi- 
bilities of  future  successes.  Our  own  homo- 
geneous domestic  market,  as  great  as  that 
of  half  of  Europe,  contrasts  strikingly  with 
the  tariff-hampered  field  of  European  manu- 
facturers. Our  foreign  competitors  meet  at 
every  turn  the  obstacles  of  customs  restricj 
tions,  of  racial  differences  and  national 
jealousies.  This  great  homogeneous  mar- 
ket of  ours  makes  a  solid  foundation  upon 
which  our  industries  can  stand  while  they 
reach  out  successfully  into  competitive  fields. 
The  conquest  of  foreign  markets  will  not 
be  an  easy  one,  however.  We  are  likely  to 
meet  with  defeat  and  failure  at  some  points 
caused  by  our  failure  to  give  proper  atten- 
tion to  the  business  —  and  there  are  many 
examples  of  that  in  the  past  —  or  caused  by 

211 


Business  and  Education 

a  combination  of  obstacles  which  we  cannot 
overcome.  Perhaps  we  may  see  an  example 
of  the  latter  situation  in  the  Far  East.  It  is 
by  no  means  certain  that  Japan  is  to  stand 
courteously  at  the  open  door  of  Oriental 
trade  and  permit  us  to  enter.  We  have  seen 
in  China  what  a  racial  boycott  can  do  in  in- 
terfering with  trade  totals.  Oriental  trade 
is  not  something  won,  but  something  to  be 
striven  for  and  there  will  be  difficulty,  defeat, 
disappointment,  and  discouragement.  Nor 
is  the  trade  of  Europe  to  be  ours  for  the 
asking.  The  obstacles  of  tariff  walls  grow 
higher  with  every  meeting  of  Continental 
Parliaments.  The  ability  to  compete  with 
us  increases  as  our  methods  are  better  com- 
prehended. Germany  has  gone  so  far  ahead 
of  us  in  the  proper  education  of  the  indus- 
trial classes  that  we  may  lose  at  times  from 
that  cause  alone. 

I  do  not  mean  that  advantage  is  to  come 
to  us  through  disaster  to  others.  We  have 
perhaps  more  than  our  just  measure  of  pros- 
perity, but  there  seems,  at  the  moment,  to 
be  good  measure  throughout  the  world.  The 
world  has  withstood  the  financial  strain  of 
a  war  which  cost  the  combatant  nations  two 
billion  dollars.  It  has  withstood  that  strain 
so  easily  that  one  is  led  to  inquire  how  it  has 
been  possible  that  such  a  disaster  should 
have  produced  no  more  unfortunate  results. 

212 


The  Industrial  Future 

I  believe  the  answer  to  that  should  be  looked 
for  in  a  quarter  to  which  our  academic 
friends  have  been  giving  some  attention,  but 
which  has  not  as  yet  come  to  excite  very- 
great  interest  among  practical  financiers.  It 
is  not  alone  to  the  raisers  of  grain  that  nature 
has  been  bountiful  of  late.  The  mines  of 
the  world  have  been  yielding  treasure  as 
lavishly  as  have  our  fields.  In  every  day 
of  this  year,  1905,  work  days  and  feast 
days,  holidays  and  Sundays,  there  will 
be  drawn  from  the  ground  a  million 
dollars  of  new  gold.  And  then  when 
the  total  is  finally  cast  up  there  will  be  a 
number  of  odd  millions  to  spare  above  that 
average.  The  mines  of  the  world  will  pro- 
duce this  year  $375,000,000  of  gold.  The 
final  figures  for  the  production  of  gold  in 
1904  have  recently  been  made  and  they 
footed  $347,000,000.  We  may  reasonably 
look  forward  in  the  near  future  to  an  annual 
average  output  of  $400,000,000  of  new  gold 
for  at  least  a  considerable  number  of  years. 
When  we  remember  that  in  1885  the  pro- 
duction of  gold  was  but  $115,000,000,  we 
begin  to  get  a  comprehensive  view  of  the 
significance  of  this  increase.  When  we  re- 
member further  that  the  entire  monetary 
stock  of  gold  in  the  world  is  about  $5,700,- 
000,000  we  can  calculate  that  the  output 
from  the  mines  in  the  next  fourteen  years 
213 


Business  and  Education 

promises  to  equal  a  total  as  great  as  the 
present  monetary  stock  of  gold.  These  fig- 
ures are  startling.  They  perhaps  suggest 
the  possibility  of  a  disturbance  of  values.  It 
does  not  follow,  of  course,  that  with  the  pro- 
duction of  $400,000,000  of  gold  per  annum 
the  monetary  stocks  will  be  increased  by  that 
amount.  The  uses  of  gold  in  the  domestic 
arts  draw  off  at  least  $75,000,000  a  year, 
but  that  will  leave  over  $300,000,000  a  year 
to  add  to  the  gold  reserves.  So  eminent  an 
economist  as  Le  Roy  Beaulieu  has  estimated 
that  the  monetary  stocks  of  the  world  will 
be  doubled  in  twenty-five  years.  In  the  light 
of  recent  statistics  of  the  output  of  produc- 
tion I  have  no  doubt  that  he  would  modify 
that  estimate  and  incline  to  the  view  that 
the  monetary  stocks  will  be  doubled  in 
twenty  years. 

What  is  this  to  mean  to  the  business  situ- 
ation? What  is  to  be  its  influence  upon 
prices?  What  effect  will  it  have  upon 
money-rates  ?  These  are  no  longer  academic 
questions.  They  are  practical  considerations 
which  need  to  be  taken  into  account  by  busi- 
ness men.  The  great  increase  in  gold  pro- 
duction which  has  been  in  progress  since  the 
close  of  the  Boer  War  has,  in  my  opinion, 
been  a  factor  in  the  rapid  recovery  from  the 
depression  of  three  years  ago.  At  that  time, 
through  financial  excesses  and  indiscretions, 
214 


The  Industrial  Future 

we  were  led  into  a  dangerous  position. 
In  Europe,  also,  the  chilling  effect  of  the 
great  destruction  of  capital  occasioned  by 
that  war  was  everywhere  manifest.  This 
new  gold  production  pouring  itself  into  the 
bank  reserves  of  the  world  has  been  an  in- 
fluence in  bringing  about  the  quick  recovery 
from  depression  and  in  withstanding  the 
shock  of  the  further  destruction  of  capital 
which  the  Russo-Japanese  War  entailed. 

The  classical  economists,  Ricardo,  Adam 
Smith,  and  Mill,  evolved  the  quantity  theory 
of  money.  They  held  that  the  prices  of 
things  would  vary  with  the  quantity  of 
money  in  existence.  If  the  money  stock 
were  doubled,  prices  would  be  doubled ;  if  the 
money  stock  were  halved,  prices  would  be 
cut  in  two.  That  theory  has  been  proved  to 
be  inadequate.  There  are  many  other  inter- 
fering circumstances  and  modifying  condi- 
tions. Nevertheless  there  is  economic  truth 
and  force  in  it.  It  is  within  the  intimate 
knowledge  of  all  of  us  that  if  our  bank  re- 
serves are  increased  we  are  moved  to  in- 
crease our  loans.  A  pressure  to  increase 
loans  tends  to  reduce  interest  rates.  Lower 
interest  rates  enhance  the  price  of  income 
paying  securities.  I  think  every  one  will 
accept,  subject  to  important  modifying  con- 
ditions, the  statement  that  an  increase  in  the 
monetary  supply  has  a  tendency  to  advance 

215 


Business  and  Education 

prices.  There  may  be  other  influences  that 
will  counteract  in  the  final  result.  There  can 
be  no  doubt,  however,  that  with  every  mil- 
lion dollars  of  gold  added  to  the  bank  re- 
serves of  the  world,  there  is  a  disposition  to 
increase  credit  lines.  That  increase  in  credit 
lines  in  turn  has  its  influence  on  the  side  of 
advancing  prices.  As  a  practical  matter, 
however,  I  do  not  believe  we  are  facing  any 
economic  revolution  as  a  result  of  this  influx 
of  gold.  We  must  remember  that  the 
growth  of  business  may  keep  pace  or  even 
run  ahead  of  the  substantial  growth  in  the 
gold  reserve  so  that  in  spite  of  actual  increase 
the  relative  percentage  of  gold  reserves  to 
credit  demand  would  leave  prices  unchanged. 
The  subject  is  a  fascinating  one,  but  at  the 
outset  it  must  be  admitted  that  it  is  not  one 
for  accurate  calculation  and  definite  conclu- 
sion. There  are  a  few  considerations,  how- 
ever, and  some  popular  misapprehensions  in 
regard  to  it  concerning  which  it  would  be 
well  to  have  clear  thinking.  For  example, 
it  is  rather  commonly  said  a  great  increase 
in  the  gold  supply  will  bring  us  to  a  perma- 
nently lower  interest  basis.  That  is  a  mis- 
conception. It  is  true  that  the  first  effect  of 
gold  additions  to  a  bank  reserve  will  be  to 
lower  the  interest  rate.  That  effect,  how- 
ever, is  temporary.  When  the  money  supply 
has  reached  a  permanent  level,  no  matter 
216 


The  Industrial  Future 

how  great  the  increase  in  it  has  been,  the 
interest  rate,  other  things  remaining  un- 
changed, will  find  its  regular  level.  Interest 
is  but  a  payment  in  kind.  If  the  value  of 
money  depreciates,  the  value  of  interest  pay- 
ment depreciates  as  well.  We  need  look  for 
no  permanently  lower  interest  basis  as  a 
result  of  an  increase  in  the  money  stock,  but 
while  that  increase  is  in  progress,  the  reserves 
are  being  constantly  augmented  and  the 
tendency  would  be  toward  lower  rates. 

There  is  another  consideration  which  we 
should  have  clearly  in  mind.  Disregarding 
for  the  moment  all  other  influences,  we  may 
lay  down  the  principle  that  an  increase  in 
the  supply  of  money  will  tend  to  advance  the 
price  of  real  property,  but  the  price  of  an 
obligation  repayable  in  money  will  not  tend 
to  advance.  That  is  to  say  that  real  estate 
and  all  forms  of  property,  including  shares 
of  corporate  stock,  which  represent  an  own- 
ership in  real  property,  would  advance,  but 
bonds,  which  represent  only  the  right  to  de- 
mand a  payment  in  money,  would  not  ad- 
vance. All  persons  having  a  fixed  income 
would  find  the  purchasing  power  of  that 
income  reduced.  The  return  from  mort- 
gages and  bonds  would  have  a  reduced  pur- 
chasing power.  Persons  receiving  fixed  sal- 
aries and  wage  earners  generally  would  be 
at  a  disadvantage,  for  their  incomes  would 
217 


UNIVERSITY  I 


Business  and  Education 

not  tend  to  increase  as  rapidly  as  the  pur- 
chasing power  of  their  wages  decreased. 
Under  such  a  set  of  circumstances  there 
would  be  constant  pressure  from  wage 
earners  to  increase  their  incomes  in  order 
to  keep  pace  with  the  advanced  cost  of 
living.  Is  not  that  exactly  what  we  have 
been  seeing,  and  are  we  not  likely  to  see  more 
of  that  same  pressure  to  advance  wages  as 
the  cost  of  living  advances  ? 

These  are  tendencies  which  would  become 
sharply  manifest  if  there  were  not  counter- 
acting influences  opposing  them.  That  there 
are  sure  to  be  such  counteracting  influences 
goes  without  saying.  I  recall  a  conversation 
which  I  once  had  with  the  great  German 
financier,  von  Siemens,  the  creator  of  the 
Deutsche  Bank.  The  balances  of  trade  in 
our  favor  had  been  climbing  up  from  $400,- 
000,000  to  $500,000,000  and  then  had  gone 
well  beyond  $600,000,000,  and  it  looked  as 
if  we  might  drain  Europe  of  her  whole  mon- 
etary stock  if  that  sort  of  thing  were  to  go 
on.  I  asked  Herr  von  Siemens  what  was  to 
be  the  outcome  for  Europe.  He  replied  with 
a  well-known  German  phrase,  -'A  tree  never 
quite  grows  to  heaven."  Events  soon  proved 
that  this  tree  of  favorable  trade  balances 
could  not  quite  grow  to  heaven,  although 
for  the  moment  it  did  look  as  if  it  were 
likely  to.  And  so  with  this  increased  pro- 
218 


The  Industrial  Future 

duction  of  gold  which  gives  promise  of 
doubhng  the  monetary  stock  of  the  world  in 
the  next  score  of  years.  We  might  expect,  if 
the  theories  of  the  classical  economists  held 
good,  that  with  a  doubling  of  the  gold  stock 
would  come  a  doubling  of  prices.  We  can, 
however,  be  very  certain  that  the  theory  will 
not  entirely  hold  good.  There  will  be  coun- 
teracting influences.  While  there  will  un- 
doubtedly be  a  tendency  to  advance  prices 
as  a  result  of  this  influx  of  gold  into  the  bank 
reserves  of  the  world,  I  do  not  believe  the 
gold  production  is  likely  to  become  a  seri- 
ous menace.  I  do  not  believe  that  it  will 
so  disturb  those  business  relations  that  are 
based  upon  the  terms  of  money  as  to  cause 
any  vital  derangement  of  affairs. 

What  I  do  believe  is  that  there  is  likely  to 
follow  just  what  followed  in  the  two  former 
periods  of  the  world's  history  when  there 
was  an  extraordinary  production  of  gold 
added  to  the  monetary  stocks.  One  of  these 
periods  followed  the  discovery  of  America, 
when  the  treasures  of  Mexico  and  Peru  were 
exploited.  The  other  was  in  the  years  fol- 
lowing the  discovery  of  gold  in  California 
and  Australia.  In  each  case  a  mighty  im- 
pulse was  given  to  the  exploitation  of  virgin 
fields  of  development.  It  seems  to  me  not 
improbable  that  the  next  few  years  will  wit- 
ness the  expansion  of  the  field  of  commercial 
219 


Business  and  Education 

enterprise  into  new  places.  Countries  that 
are  commercially  and  industrially  backward 
will  yield  to  this  new  influence.  It  seems  to 
me  that  one  of  the  direct  and  important 
effects  of  this  great  production  of  gold  will 
be  to  give  an  impulse  to  the  development  and 
industrial  exploitation  of  South  America, 
Africa,  Asia,  and  eastern  Europe.  At  our 
own  hand  is  South  America  on  one  side  and 
China  and  Japan  on  the  other.  We  are 
rapidly  awakening  to  the  commercial  pos- 
sibilities within  these  countries.  If  we  are 
to  have  an  influx  of  gold  more  than  ample 
to  sustain  the  credit  operations  for  our  do- 
mestic affairs,  that  fact  will  tend  to  lead  our 
interests  into  these  new  fields  of  exploitation. 
Then,  in  turn,  a  wider  use  of  credit  which 
these  new  fields  will  develop  and  the  in- 
creased reserves  which  that  wider  use  of 
credit  will  make  necessary,  will  probably  ab- 
sorb the  increasing  gold  stock  in  beneficent 
uses,  preventing  it  from  ever  becoming  a 
serious  menace  to  business  organization. 

The  outlook  is  surely  bright.  What  can 
hurt  us?  What  dangers  are  ahead?  With 
bountiful  harvests,  with  lavish  mineral  pro- 
duction, with  increasing  financial  strength, 
with  wonderfully  improved  industrial  organ- 
ization, with  a  sound  banking  position,  and 
with  an  impulse  already  given  to  every  form 
of  commercial  activity,  what  is  there  to  fear 
220 


The  Industrial  Future 

in  the  future?  Is  it  clear  sailing?  Can  we 
make  commitments  without  fear  for  the  fu- 
ture? Is  the  whole  outlook  into  a  cloudless 
financial  horizon?  An  optimist  might  be 
forgiven  for  thinking  that  it  ought  to  be. 
We  have  a  good  many  elements  of  a  firm 
foundation  under  our  feet  but  again  we 
might  quote  the  German  phrase,  "  A  tree 
never  quite  grows  to  heaven."  Sure  as  we 
are  of  many  of  the  substantial  foundation 
stones  upon  which  to  rear  a  structure  of 
prosperity,  we  may  be  quite  as  sure  that 
there  are  dangers  lurking  in  the  situation. 
Some  may  be  avoided,  others  will  not.  Some 
it  is  possible  to  foresee,  others  we  will  fail 
to  recognize  until  we  see  their  evil  effects. 
Among  those  which  we  know  exist,  there 
comes  first  to  mind  our  illogical  and  un- 
scientific currency  system.  We  know  that 
this  system  may  at  any  time  breed  us  trouble. 
We  know  that  there  is  not  a  European  finan- 
cier of  broad  intelligence  who,  looking  dis- 
passionately from  without  at  this  currency 
system  of  ours,  does  not  feel  that  it  has  in  it 
dynamic  possibilities  for  trouble  even  if  other 
conditions  are  favorable.  Indeed  it  is  when 
all  other  conditions  are  most  favorable  that 
the  danger  is  the  greatest.  Now,  in  the  very 
fullness  of  the  prosperity  that  we  have,  there 
might  be  a  pitfall  for  us  in  that  quarter.  A 
strain  is  on  our  currency  system.    With  our 

221 


Business  and  Education 

usual  good  luck  we  may  avoid  disaster,  but 
it  is  the  sort  of  time,  nevertheless,  when  we 
ought  clearly  to  see  that  we  have  a  system 
which  might  endanger  our  banking  position 
and  retard  most  seriously  our  commercial 
development.  We  know  that  we  are  threat- 
ened by  great  social  disorders ;  that  the  edict 
of  a  labor  leader  might  change  a  cloudless 
outlook  into  an  uncertain  one.  We  know 
there  is  a  disregard  of  law  in  labor  unions 
and  in  corporation  offices  alike,  which  is 
threatening  to  our  welfare.  We  can,  at  the 
moment,  clearly  see  that  however  prosperous 
conditions  may  appear,  this  prosperity  might 
receive  a  severe  check  should  a  speculative 
fever  begin  to  rage.  Should  a  stock  market 
speculation  start  from  the  present  high  level 
of  prices  in  the  face  of  the  extraordinary  de- 
mand for  capital  and  money  which  crops 
and  business  alike  are  making,  the  result 
might  easily  be  temporary  disaster. 

I  have  been  emphasizing  some  of  the 
bright  aspects  of  the  picture,  but  there  are 
shadows.  In  a  gathering  like  this.  Jere- 
miad songs  are  not  pleasant,  but  there  are 
some  that  might  be  sung  which  would  not  be 
out  of  harmony  with  true  conditions.  Never 
was  there  a  better  time  to  preach  conserva- 
tism ;  never  perhaps  was  it  easier  to  be  car- 
ried away  by  some  of  the  obvious  features  of 
prosperity  and  to  forget  some  of  the  dangers 

222 


The  Industrial  Future 

which  in  the  end  will  be  quite  as  potent  in 
shaping  the  ultimate  result.  "  A  tree  never 
quite  grows  to  heaven."  Although  there 
may  be  many  favorable  features  to  the  out- 
look, it  is  no  time  for  prudence  to  be  cast 
to  the  wind;  no  time  for  speculative  com- 
mitments which  would  yield  disaster  if 
temporary  reverses  came;  no  time  for  lax- 
ness  in  any  of  the  forms  of  business  pru- 
dence and  conservatism. 


223 


OLD-AGE    PENSIONS    FOR 
WORKINGMEN 

An  address  delivered  before  the  Commercial  Club  of 
Chicago,  October  28,  1906. 

Coffee  and  statistics  were  never  intended  to 
be  mixed.  The  subject  of  old-age  pensions 
for  workingmen  does  not  lend  itself  to  the 
sort  of  after-dinner  talk  which  men  like  to 
hear.  I  am  sufficiently  impressed  with  the 
importance  of  a  study  of  the  problems  which 
the  question  presents,  to  believe  that  there 
are  few  topics  which  might  better  engage 
the  attention  of  such  a  group  of  men  as  com- 
pose the  Commercial  Club,  but  I  admit  that 
the  subject  is  not  one  that  blends  well  with 
the  smoke  of  an  after-dinner  cigar. 

No  men  know  better  than  you  the  changes 
which  have  been  going  on  in  industrial  life 
in  the  last  generation.  There  have  been  ten- 
dencies toward  specialization  and  concen- 
tration. There  has  been  a  remarkable  ap- 
plication of  mechanical  aids.  We  have  been 
working  toward  production  on  a  vast  scale. 
This  has  created  an  industrial  army,  the 
rank  and  file  of  which  tend  more  and  more 
toward  becoming  automatic  wheels  in  the 
224 


Old- Age  Pensicms  for  WorTcmgmen 

great  industrial  organization.  The  new  in- 
dustrial order  has  made  a  new  social  order. 
There  is  to-day  no  such  thing  as  industrial 
independence  possible  for  a  working  man. 
He  must  work  with  others.  He  must  become 
subject  to  regulations  in  common  with  his 
fellows.  He  must,  in  exchange  for  the  com- 
forts of  life  which  have  come  to  him,  give 
up  in  large  measure  his  industrial  independ- 
ence and  work  in  harmony  with  these  new 
industrial  conditions. 

So  long  as  the  individual  can  actively  fill 
his  place  in  this  new  order  of  affairs  his  con- 
dition shows  great  improvement  in  many 
respects.  The  moment  he  gets  out  of  har- 
mony with  the  whirl  of  the  industrial  ma- 
chine, however,  the  moment  that  sickness 
overtakes  him  and  accident  injures  him  or 
old  age  reduces  his  power  to  keep  in  step 
with  the  industrial  march,  his  condition  is 
likely  to  become  incomparably  more  unfor- 
tunate than  would  have  been  the  case  under 
similar  circumstances  in  earlier  times. 

Such  business  men  as  you  recognize 
clearly  enough  a  changed  order  of  affairs  in 
industrial  and  commercial  life.  You  know 
that  you  must  shape  your  business  methods 
so  as  to  harmonize  with  the  new  order  of 
things.  You  know  that  you  must  co-operate 
in  many  ways  with  your  fellows ;  must  share 
with  them  their  risks;  must  help  to  sustain 
IS  225 


Business  and  Education 

them  in  their  misfortunes.  You  know  that 
you  have  lost  in  the  new  order  of  things  a 
certain  amount  of  independence.  It  ought 
not  to  be  difficult  then  to  see  that  your  em- 
ployees are  also  in  the  midst  of  a  changed 
condition  and  that  principles  which  apply  to 
the  relations  between  employers  and  em- 
ployees, and  to  the  relations  between  the 
State  and  the  citizen  have  been  undergoing 
change.  I  believe  that  the  reason  why  you 
are  interested  in  the  subject  of  working- 
men's  pensions  is  to  be  found  in  the  funda- 
mental change  which  has  been  going  on  in 
industrial  affairs.  I  believe  your  interest 
logically  follows  the  evolution  of  economic 
laws,  and  if  we  are  to  seek  for  a  secure 
foundation  upon  which  to  rest  judgment  in 
regard  to  this  question  of  workingmen's  pen- 
sions, we  will  find  it  in  an  analysis  of  eco- 
nomic conditions  rather  than  in  sentimental 
consideration  or  charitable  ebullition. 

Nations  older  than  we  are  came  earlier  to 
a  consideration  of  this  subject.  The  place 
where  the  greatest  progress  has  been  made 
in  an  experiment  in  workingmen's  pensions 
is  in  Germany.  It  is  safe  to  say  that  the 
German  system  of  workingmen's  insurance 
is  the  most  important  experiment  in  progress 
in  the  world  in  the  way  of  a  government- 
aided  sociological  institution.  The  impor- 
tance of  it  is  hardly  understood  in  America 
226 


Old- Age  Pensions  for  Workingmen 

nor  is  its  extent  realized.  It  pervades  every 
phase  of  the  industrial  field.  Twenty  mil- 
lions of  Germany's  fifty-two  millions  of  pop- 
ulation are  eligible  to  these  benefits,  and  the 
cost  of  administration  falls  alike  on  these 
beneficiaries  and  up@n  all  other  citizens  of 
the  empire.  The  total  receipts  will,  from  its 
organization  up  to  the  end  of  this  year,  have 
aggregated  almost  $2,000,000,000.  The  re- 
ceipts this  year  will  approximate  $150,000,- 
000.  A  satisfactory  feature  of  the  German 
state  insurance  system  is  that  the  benefits 
paid  out  correspond  very  closely  with  the 
premiums  paid  in.  The  expense  of  adminis- 
tration, considering  the  enormous  number  of 
individuals  concerned,  and  the  fact  that 
weekly  contributions  are  collected  from  em- 
ployees, is  surprisingly  small.  It  averages 
under  9  per  cent. 

The  German  system  of  workingmen's  in- 
surance is  not  to  be  regarded  as  merely  an 
old-age  pension  scheme.  As  a  matter  of  fact 
the  old-age  pension  feature  is  the  least  im- 
portant part  of  it  and  the  least  satisfactory. 
There  are  three  great  divisions  of  working- 
men's  insurance  in  Germany.  These  are 
insurance  against  sickness,  against  accident, 
and  against  want  in  old  age.  The  fund  for 
insurance  against  sickness  is  provided  in  the 
main  by  the  employees.  The  employers  con- 
tribute roughly  one-third  and  the  workmen 
227 


Business  and  Education 

two-thirds.  The  Government  gives  no  sub- 
sidy for  either  the  sick  insurance  or  the 
accident  insurance.  Employers  are  charged 
with  the  entire  burden  of  maintaining  the 
accident  insurance  fund,  while  the  fund  for 
old  age  insurance  is  contributed  to  equally 
by  employers  and  employees,  and  is  aug- 
mented by  a  subsidy  from  the  Government 
which  is  nearly  equal  to  the  total  cost  of  ad- 
ministering the  whole  system. 

It  is  quite  impossible  to  enter  into  a  de- 
tailed explanation  of  the  German  system  of 
workingmen's  insurance.  I  know  of  no 
other  problem  of  administration  where  the 
details  are  so  complicated.  Not  only  are 
there  three  distinct  systems  of  insurance; 
but  there  are  complications  of  Government 
participation  in  the  funds  and  of  a  division 
of  the  authority  of  administration  between 
Government  officials  and  some  twenty-five 
thousand  local  organizations.  Whatever 
view  one  might  hold  in  regard  to  the  benefits 
of  the  system,  there  could  be  no  difference  of 
opinion  in  regard  to  this  method  of  adminis- 
tration. It  is  certainly  too  complicated  to 
transplant  to  any  other  country.  Many  of 
these  features  of  administration  would,  in 
any  American  consideration  of  the  subject, 
be  regarded  as  errors  to  be  avoided  rather 
than  as  examples  to  be  followed.  It  is 
charged  that  the  complicated  administration 
228 


Old- Age  Pensions  for  Workingmen 

had  birth  in  the  fertile  brain  of  Bismarck, 
whose  statesmanship  was  equal  to  killing 
two  birds  with  one  stone.  In  the  pension 
system  itself  he  placated  the  workmen  who 
had  run  after  the  false  gods  of  Socialism, 
and  in  the  methods  of  administration  he  pro- 
vided a  police  espionage  more  complete  than 
any  ever  conceived  in  the  secret  service  of 
Russia.  Be  that  as  it  may,  the  system 
has  long  since  outgrown  whatever  may  have 
been  in  the  Iron  Chancellor's  mind  at  its  or- 
ganization, but  has  not  freed  itself  from  the 
incubus  of  the  enormously  detailed  adminis- 
tration with  divided  authority  and  compli- 
cated incidence. 

The  principles  underlying  the  theory  of 
German  workingmen's  insurance  might  be 
briefly  summarized  in  this  way.  The  Ger- 
man nation  was,  in  a  few  years,  transformed 
from  an  agricultural  country  into  an  indus- 
trial state.  An  evolution  at  the  same  time 
was  in  progress  in  the  field  of  industry  which 
resulted  in  the  highest  specialization  of  work 
and  the  greatest  development  of  the  factory 
system.  These  all  combined  to  make  a  prac- 
tically new  social  order  of  things,  and  made 
necessary  an  enunciation  of  new  principles 
in  regard  to  the  duty  of  the  community  to- 
ward the  individual.  These  principles  are 
novel  in  political  life,  but  fundamental  in 
character.  The  Germans  argue  that  no  mat- 
229 


Business  and  Education 

ter  how  free  they  may  be  politically  they 
cannot  possibly  be  economically  independent 
because  of  the  intricate  and  complicated 
modern  system  of  industry.  The  individual 
in  spite  of  himself  becomes  a  part  of  the  in- 
dustrial order  and  is  so  placed  that  it  is 
difficult,  if  not  impossible,  for  him  to  ex- 
tricate himself  from  his  misfortune  should 
he  be  overtaken  by  accident  or  sickness,  or 
should  he  reach  a  dependent  old  age.  In  the 
new  industrial  order  the  liability  to  accident 
is  greatly  increased,  and  that  in  itself  de- 
mands new  means  for  meeting  such  a  con- 
dition. 

In  Germany,  as  indeed  throughout  Eu- 
rope, the  question  of  the  liability  of  employ- 
ers in  the  case  of  accidents  to  workmen  is 
one  which  for  a  number  of  years  has  received 
much  attention  from  the  law-makers.  It  is 
certain  that  with  the  introduction  of  high 
power  and  complicated  machinery,  there  has 
been  a  great  increase  in  the  number  of  ac- 
cidents which  are  beyond  the  control  of  the 
workmen  themselves.  A  strict  interpreta- 
tion of  the  common  law  has  for  the  most  part 
absolved  employers  from  the  greater  part  of 
their  obligations  under  such  circumstances. 
The  development  of  the  workingmen's  in- 
surance idea  in  Europe  has  been  in  large 
measure  the  logical  result  of  efforts  to  reform 
the  law  relating  to  the  liability  of  employers 
230 


Old- Age  Pensions  for  Workingmen 

for  accidents  to  their  employees.  Under  the 
old  law  the  employer  was  responsible  only 
for  those  accidents  resulting  directly  from 
his  fault  or  the  fault  of  his  agents.  The 
application  of  that  law  meant  that  the  em- 
ployer bore  the  consequence  only  when  the 
accident  was  due  to  his  fault,  and  then  only 
after  the  injured  employee  succeeded  in 
legally  establishing  the  proof  of  that  fault. 
Europe  has  seen  more  plainly  than  we 
have  in  this  country  the  injustice  of  such  a 
condition. 

When  such  legal  principles  were  evolved 
establishments  were  small,  the  employer  was 
in  intimate  relation  with  the  employee  and  it 
was  comparatively  easy  to  determine  the 
responsibility.  With  the  growth  of  large- 
scale  production  and  the  introduction  of  com- 
plicated and  dang-erous  machinery,  the  whole 
system  became  so  complex  that  it  was  ex- 
tremely difficult  to  trace  responsibility.  The 
result  was  that  as  a  rule  the  full  weight  of 
suffering  from  an  accident  fell  upon  the  in- 
jured employee.  Here  in  America  we  have 
gone  even  further.  We  have  perfected  or- 
ganizations for  iasuring  not  the  employee 
against  accident  but  the  employer  against 
liability.  These  organizations  are  not  to  in- 
demnify the  injured,  but  rather  to  indemnify 
the  employer  for  the  costs  of  fighting  in  the 
courts  the  claims  of  the  injured.  I  am  not 
231 


Business  and  Education 

saying  that  employers  have  been  without 
reason  for  wishing  such  indemnification.  I 
know  there  are  lawyers  who  might  better  be 
in  jail  than  in  court.  I  know  there  are  juries 
which  have  determined  verdicts  on  whether 
or  not  the  defendant  was  a  corporation 
rather  than  upon  any  facts  that  were  pre- 
sented in  regard  to  the  case  under  consid- 
eration, but  in  spite  of  all  this  I  do  not  be- 
lieve that  even  these  evils  warrant  the  way 
in  which  we  throw  the  burden  of  accidents 
upon  the  injured.  Elsewhere  the  world  has 
grown  beyond  the  old  system  of  common- 
law  liability.  I  do  not  believe  that  the  or- 
ganization of  shrewdly  managed  and  power- 
ful corporations  whose  business  it  is  to  con- 
test in  the  courts  the  claims  of  injured 
people  is  in  harmony  either  with  the 
present-day  condition  of  industry  or  with 
the  present-day  conception  of  humanity. 

I  was  saying  that  one  of  the  most  im- 
portant features  of  the  German  insurance 
scheme  is  the  provision  of  an  indemnity  to 
persons  injured  in  industrial  occupations. 
The  work  has  been  in  the  direction  of  justice 
and  of  humanitarianism,  but  like  most  acts 
that  are  in  conformJty  with  justice,  the  ad- 
vantages have  been  greater  than  were  at  first 
apparent. 

Accident  insurance  as  developed  in  Ger- 
many has  been  something  more  than  merely 
232 


Old-Age  Pensions  for  Workingmen 

the  providing  of  an  indemnity.  It  has  been, 
in  fact,  an  insurance  against  accidents.  This 
definite  placing  of  the  responsibiHty  for  acci- 
dents has  led  to  much  study  by  employers 
and  employees  of  regulations  providing  for 
safeguards.  Such  study  has  accomplished 
remarkable  results  in  the  reduction  of  the 
number  of  accidents,  and  has  become  a 
great  economic  factor  in  removing  the  dan- 
ger from  industrial  callings.  Under  the 
influence  of  this  study  the  frequency  of  acci- 
dents has  been  reduced  one-half.  Viewed 
from  an  economic  standpoint  alone  the  sav- 
ing which  has  resulted  in  the  national  econ- 
omy has  been  a  vast  sum.  We  are  strikingly 
careless  of  life  in  America.  The  statistics  of 
industrial  injuries  and  fatalities  are  a  dis- 
grace. In  the  rush  of  our  industrial  expan- 
sion we  have  neglected  to  provide  many  of 
the  obviously  necessary  safeguards.  From 
whatever  aspect  we  may  regard  the  subject, 
we  will,  on  any  broad  view  of  it,  find  that  the 
adoption  of  some  of  the  European  regula- 
tions and  safeguards  will  be  of  great  national 
advantage. 

The  second  division  of  the  German  in- 
surance system  and  the  one  which  to  my 
mind  has  by  all  odds  most  fully  demon- 
strated its  value,  is  the  sick  insurance  fund. 
The  advantage  to  the  workmen  of  a  sick 
insurance  fund  is  clear  enough.     I  will  pass 

233 


Business  and  Education 

over  without  any  comment  the  strikingly  ad- 
vantageous features  of  this  sick  insurance 
system,  for  there  are  some  others  which 
seem  to  me  of  the  highest  economic  impor- 
tance, and  which  are  well  worth  emphasizing. 
I  believe  that  this  sick  insurance  system  in 
Germany  is  having  a  profound  effect  on  the 
whole  physical  welfare  of  the  nation.  I 
believe  that  the  general  level  of  vitality,  and 
hence  of  working  capacity,  is  being  distinctly 
raised  as  a  result  of  it.  It  must  be  remem- 
bered that  the  activities  in  the  sick  insurance 
field  are  not  confined  to  the  mere  payment  of 
the  indemnity  during  a  period  of  illness. 
The  sick  insurance  not  only  makes  it  possible 
for  a  workman  who  is  ill  to  take  at  once  the 
necessary  time  for  recovery,  but  it  provides 
him  with  the  best  medical  attention  after  he 
is  ill,  and  while  in  health  it  gives  hygienic 
supervision  and  instruction  which  is  of  the 
greatest  value  in  preventing  sickness.  Un- 
der the  operation  of  this  system  there  is 
being  spent  in  the  most  intelligent  manner, 
something  like  $50,000,000  a  year  in  the 
treatment  and  care  of  the  sick. 

The  testimony  in  regard  to  the  value  of 
the  work  done  in  the  sick  insurance  system 
is  almost  universally  favorable.  It  would 
be  hard  to  calculate  its  economic  importance, 
but  I  believe  it  is  so  great  that  it  has  become 
one  of  the  leading  factors  in  helping  that 
234 


Old- Age  Pensions  for  Workmgmen 

country  to  the  industrial  pre-eminence  which 
it  is  gaining. 

There  is  undoubtedly  here  and  there 
ground  for  criticism.  Lazy  patients  occa- 
sionally sham  illness.  There  are  workmen 
who  would  rather  lie  in  bed  with  a  small  in- 
come than  work  for  a  larger  one.  But  the 
principal  effect  of  this  sick  insurance  is,  I 
believe,  of  economic  value  in  the  industrial 
development  of  the  German  Empire  out  of 
all  proportion  to  the  burden  which  is  laid 
upon  employers. 

The  first  two  divisions  of  the  German  in- 
surance scheme  providing  for  indemnities 
against  accident  and  sickness  will,  I  believe, 
commend  themselves  to  every  investigator 
of  the  subject. 

There  is  now  left  to  consider  the  third 
division,  the  German  old-age  pension  system, 
which  is,  as  I  have  said,  the  least  important 
and  the  most  criticised  feature  of  the  German 
workingmen's  insurance  institution.  The 
contributions  which  it  calls  for  are  very 
small,  and  the  final  pension  provision  is  gen- 
erally regarded  by  the  workmen  as  entirely 
inadequate.  Although  the  employers  con- 
tribute an  amount  equal  to  that  contributed 
by  the  workmen,  and  the  Government  finally 
adds  a  considerable  subsidy,  there  still  is  less 
general  satisfaction  among  the  workmen 
with  this  division  of  the  insurance  scheme 

235 


Business  and  Education 

than  with  the  others.  The  reason  for  that 
lies  in  a  measure  in  the  perversities  of  human 
nature.  The  contributions,  small  as  they  are, 
are  collected  every  week,  and  are  a  constant 
reminder  to  youth  of  a  sacrifice  being  made 
for  problematical  benefits  a  long  way  in  the 
future.  The  benefits  of  the  accident  and  sick 
insurance  are  more  directly  at  hand.  The 
workmen  themselves  are  most  intimately  re- 
lated to  the  administration  of  the  first  two 
funds. 

There  is  a  pretty  general  demand  for  an 
increase  of  the  old-age  pension.  When  it  is 
remembered  that  the  contributions  from  the 
men  range  from  six  to  fifteen  cents  a  week, 
and  that  these  payments  return  a  pension 
after  seventy  years  of  age  of  $27.50  to  $60, 
it  is  easily  recognized  that  there  is  ground  for 
complaint  as  to  the  smallness  of  the  amount. 
There  is  a  general  demand  among  the  work- 
men to  have  a  reduction  in  the  age  limit. 
Sixty-five  years  is  considered  a  desirable 
time  for  the  pension  to  begin  rather  than 
seventy  years. 

One  incidental  feature  of  the  administra- 
tion of  the  German  system  which  is  proving 
of  very  great  value  is  to  be  found  in  the  way 
in  which  the  sick  and  accident  funds  are  ad- 
ministered by  committees  made  up  of  em- 
ployers and  workingmen.  Employers  and 
workingmen  come  together  on  common 
236 


Old-Age  Pensions  for  Workingmen 

ground.  They  are  working  toward  common 
ends.  With  the  responsibiHty  of  administra- 
tion on  their  shoulders  radical  socialists  be- 
come conservative.  With  the  broader  point 
of  view  which  close  association  with  em- 
ployees brings,  the  employers  are  benefited. 
The  fact  that  in  the  twenty-five  thousand  ad- 
ministrative organizations,  workmen  and  em- 
ployers have  been  brought  together  to  give 
harmonious  consideration  to  the  means  for 
accomplishing  a  common  end,  is  proving  of 
immense  importance  in  maintaining  pleasant 
relations  between  capital  and  labor. 

As  the  German  system  of  workingmen's 
insurance  is  by  all  odds  the  most  important 
experiment  of  this  sort  in  the  world,  I  have 
been  to  some  pains  to  ascertain  at  first  hand 
just  what  German  manufacturers  and  men 
of  affairs  think  about  it.  I  have  felt  that  it 
would  be  interesting  to  you  representative 
men  of  affairs,  to  know  what  is  thought  in 
Germany  of  this  institution  by  men  of  our 
own  type.  With  that  in  view  I  addressed  a 
series  of  questions  to  a  considerable  number 
of  the  most  prominent  manufacturers  and 
other  representative  men  in  Germany.  I 
regret  that  I  have  not  received  the  same 
courtesy  in  the  way  of  replies  that  I  believe 
would  have  been  accorded  by  you  had  an 
inquiry  come  in  the  other  direction  across 
the  Atlantic,  but  I  have,  nevertheless,  re- 

237 


Business  and  Education 

ceived  a  number  of  replies  from  some  of  the 
most  important  people  in  Germany.  In  the 
main  the  views  held  are  distinctly  favorable 
to  the  institution,  although  in  the  details  of 
its  administration  there  is  found  ground  for 
criticism.  The  idea  seems  to  be  general  that 
the  system  works  for  patriotic  loyalty  to 
the  Government  on  the  part  of  the  working 
people.  The  earlier  idea  of  the  State  in  the 
workmen's  mind  was  largely  based  on  the 
policeman,  the  sheriff,  and  the  tax  gatherer. 
The  State  always  took  something.  Now  it 
is  said  if  we  watch  a  post-office  money-order 
department  on  the  first  of  the  month,  we  see 
the  people  drawing  their  insurance  money, 
and  for  the  first  time  the  workman  views  the 
State  as  a  giver.  More  than  a  million  marks 
a  day  are  paid  out  to  them  in  this  way,  and 
the  result  in  the  way  of  developing  patriotic 
regard  for  the  Government  is  excellent. 

The  characteristics  of  the  German  labor- 
ing system  have  been  described  as  low  wages, 
pensions,  and  contentment.  The  first  is  cer- 
tainly correct.  In  many  fields  of  labor  in 
Germany  the  pay  is  less  than  one-half  the 
amount  corresponding  workmen  would  re- 
ceive for  similar  work  in  this  country,  and, 
not  infrequently,  it  is  not  over  one-third. 
On  the  whole  the  German  workingmen,  so 
far  as  I  have  been  able  to  observe,  appear  to 
be  more  contented  than  American  working- 
238 


Old-Age  Pensions  for  Workingmen 

men.  Whether  this  contentment  is  due  to  the 
pension  system  or  not  is,  of  course,  an  open 
question.  The  contentment  of  the  German 
working  classes  might  be  described  as  phys- 
ical rather  than  mental.  The  German  is 
nothing  if  not  critical.  The  whole  German 
nation  is  given  to  analysis  and  criticism  of  its 
own  institutions,  and  if  one  wanted  to  collect 
evidence  of  discontent  among  the  German 
working  classes,  and  went  to  the  printed  page 
to  do  it,  there  would  be  no  end  to  the  mass 
of  testimony. 

None  of  my  correspondents  claimed  that 
the  effect  has  been  to  make  the  workman 
contented.  The  Empire  is  new.  Germany's 
industrial  prominence  is  new.  One  cannot 
separate  the  effect  of  this  insurance  and  say 
that  certain  good  results  are  due  to  it  alone. 
That  the  workman  is  not  content  must  be 
admitted,  nor  is  the  man  who  makes  a  mil- 
lion contented.  The  workman  has  had  this 
new  set  of  rights  and  privileges  given  to  him, 
and  his  eyes  are  opened  to  the  possibilities 
of  more  rights  and  greater  privileges.  A 
perspective  of  new  things  is  opened  to  him. 
His  discontent,  however,  is  due  not  to  faults 
of  the  pension  system,  my  correspondents 
tell  me,  but  rather  to  a  desire  for  an  exten- 
sion of  its  benefits. 

The  general  effect  of  the  system  is  thought 
to  have  a  good  influence  in  preventing  a 

239 


Business  and  Education 

tendency  toward  Socialism.  Most  of  the 
workmen  who  are  members  of  the  adminis- 
trative committees  are  Social  Democrats. 
My  correspondents  tell  me  that  it  is  simply 
wonderful  to  see  how  the  most  radical  politi- 
cal shouters  quiet  down  when  they  find  them- 
selves on  a  committee  discussing  grave  mat- 
ters and  charged  with  the  responsibility  of 
important  decisions. 

I  asked  my  German  friends  their  opinion 
as  to  whether  or  not  it  would  be  advanta- 
geous for  America  to  adopt  a  workingmen's 
pension  scheme.  Their  replies  to  that  ques- 
tion were  illuminating.  This  is  what  the 
manager  of  one  of  the  greatest  industries 
said :  "  I  think  the  general  opinion  in  Ger- 
many is  that  in  America  the  creation  of 
large  funds  under  Government  control  would 
cause  great  temptation  for  their  misappro- 
priation. Their  collection  and  distribution 
would  be  too  dependent  upon  politics.  This 
opinion  seems  largely  justified  in  view  of  the 
instances  of  maladministration  that  so  many 
of  your  Government  Departments  have  re- 
cently furnished.  The  German  opinion  is 
that  the  American  citizen  is  as  yet  too  indi- 
vidual in  his  honesty  and  efficiency.  Collec- 
tively, as  exhibited  in  the  government  of 
your  municipalities  and  of  the  State,  you 
seem  to  us  weak  in  economical  and  ineffec- 
tive in  business  management  and  financial 
240 


Old-Age  Pensions  for  Workmgmen 

integrity."  That  is  not  a  pleasant  criticism 
to  receive,  but  there  is  more  justice  in  it  than 
we  all  might  wish. 

Another  correspondent,  most  eminent  in 
both  industrial  and  public  life  in  Germany, 
says :  "  The  German  nation  believes  that  it 
can  conscientiously  recommend  the  introduc- 
tion of  the  system  of  workingmen's  insurance 
into  other  countries,  but  so  far  as  the  United 
States  is  concerned,  such  a  system  does  not 
seem  as  great  a  necessity  as  in  other  coun- 
tries. Wages  are  higher  in  America  and 
the  workmen  better  capable  of  providing  for 
the  future."  He  then  makes  an  interesting 
suggestion.  He  says  :  "  There  is  no  doubt 
that  the  introduction  of  compulsory  insur- 
ance would  produce  a  social  line  of  demarka- 
tion  between  those  who  are  obliged  to  sub- 
mit to  the  law  and  those  who  are  exempt, 
and  we  doubt  if  the  people  of  America  would 
look  upon  such  a  social  classification  with 
favor.  It  cannot  be  denied  that  with  the 
German  system  there  is  a  certain  amount  of 
tutelage  which  the  American  workman  in 
consequence  of  his  independence  would  bit- 
terly resent.  Should  the  system  ever  be  in- 
troduced, I  do  not  believe  it  would  be  wise 
to  entrust  it  to  the  various  States.  It  will 
be  more  beneficial  if  brought  under  the  con- 
trol of  the  Federal  Government." 

In  every  Continental  country  the  political 

i6  241 


Business  and  Education 

questions  which  occupy  the  foremost  posi- 
tion in  parhamentary  consideration  are 
measures  designed  to  improve  the  condition 
of  the  laboring  population.  We  are  apt  to 
think  of  ourselves  as  a  republic  more  swayed 
by  the  democratic  voice  of  the  people  than 
are  other  nations.  It  strikes  an  American 
as  curious  to  find  that,  in  monarchical  Eu- 
rope, governments  everywhere  are  paying 
the  closest  heed  to  the  public  will.  This,  of 
course,  is  true  in  small  measure  in  Russia, 
but  in  France,  Germany,  Belgium,  Italy,  and 
Holland  particularly,  and  in  Austria-Hun- 
gary and  Spain  to  a  less  degree,  the  foremost 
legislative  movements  are  concerned  with 
questions  of  improving  the  condition  of  the 
laboring  people. 

The  way  in  which  parliaments  bow  to 
popular  will  was  strikingly  illustrated  in  the 
French  Assembly  some  three  years  ago, 
when  by  a  vote  of  537  to  3  the  law  concern- 
ing aid  for  old  people  was  passed.  The 
French  Government  has  for  years  taken  a 
benevolent  attitude  toward  this  subject,  and 
in  particular  has  made  it  easy  for  persons  in 
humble  circumstances  to  secure  annuities 
from  the  Government  either  by  a  single  small 
payment  during  the  early  years  of  life,  or  by 
a  series  of  payments. 

The  principle  of  giving  aid  to  old  people 
was  adopted  in  a  moderate  way  ten  years 
242 


Old- Age  Pensions  for  Workingmen 

ago,  but  it  was  not  made  compulsory  upon 
the  various  Departments.  The  present  law 
broadly  proclaims  the  obligation  of  the  State 
to  aid  people  whose  years  have  passed  the 
line  of  usefulness.  In  all  the  debates  in  the 
Assembly,  that  principle  —  the  obligation  of 
the  State  to  give  aid  —  was  not  opposed,  and 
the  admission  of  the  principle  is,  of  course, 
the  most  important  fact  about  the  whole 
affair.  The  present  law  considers  the  obliga- 
tion as  one  to  be  largely  borne  by  the  com- 
mune or  township,  and  the  major  part  of  the 
payments  are  made  from  commune  funds, 
although  the  funds  of  the  general  Govern- 
ment are  used  to  supplement  the  local  grants. 
It  is  anticipated  that  somewhere  from  300,- 
000  to  500,000  people  will  receive  regular 
monthly  payments  when  this  law  is  in  full 
operation. 

Even  the  Russian  Government  has  made 
provision  for  insurance  by  the  State.  There 
the  business  is  entrusted  to  the  governmental 
savings  banks.  The  Government  proposes 
to  make  the  taking  out  of  insurance  oblig- 
atory so  far  as  employees  on  the  Government 
railways  are  concerned,  and  it  arranges  for 
the  payment  of  the  premiums  by  deductions 
from  the  monthly  salaries. 

With  the  exception  of  the  United  States, 
all  the  great  powers  of  the  civilized  world 
pension  their  civil  servants. 
243 


Busi/ness  and  Education 

The  question  of  civil  pensions  in  the 
United  States  is,  I  presume,  not  one  that 
interests  you  particularly,  but  I  believe  it  is 
one  in  which  you  ought  to  be  interested. 
The  full  working  out  of  the  merit  system  in 
civil  service  can  never  be  accomplished,  I 
believe,  until  we  recognize  the  principle  of  a 
civil  pension  for  superannuated  Government 
employees.  There,  is  no  other  important 
nation  which  has  not  recognized  that  prin- 
ciple. I  doubt  if  there  are  any  men  who 
have  ever  been  charged  with  the  responsibil- 
ity of  an  appointive  office  in  the  Government 
service,  who  have  not  come  to  recognize  that 
need,  and  who  have  not  been  won  over  to  the 
belief  that  it  would  be  economy  in  Govern- 
ment administration  if  a  proper  system  of 
civil  pensions  were  devised. 

Look  now  from  the  foreign  field  to  what 
has  actually  been  accomplished  in  the  way 
of  old-age  pensions  in  this  country.  There 
will  be  found  much  that  is  interesting.  A 
careful  canvass  has  been  made  of  railroads 
and  large  business  corporations  in  America 
to  ascertain  the  number  of  such  corporations 
which  have  been  led  to  adopt  some  sort  of 
old-age  pensions.  In  an  inquiry  reaching 
nearly  two  thousand  corporations  replies 
show  that  seventy  have  adopted  some  plan 
for  retiring  and  providing  for  employees 
during  old  age.  Without  a  single  exception 
244 


Old- Age  Pensions  for  Worki/ngmen 

these  corporations  which  have  adopted  such 
a  plan  expressed  the  opinion,  after  having 
had  an  opportunity  to  note  its  effects,  that 
it  is  a  wise  business  practice.  Among  the 
corporations  having  a  pension  system  are 
some  of  the  most  important  in  the  United 
States.  Some  four  hundred  others  replied 
that  they  had  the  matter  under  serious 
consideration  and  that  they  were  convinced 
that  the  principle  was  sound  from  a  business 
viewpoint. 

More  than  thirty  years  ago,  the  Grand 
Trunk  Railway  of  Canada  adopted  a  pension 
system  which  has  been  growing  in  impor- 
tance, and  has  continually  given  good  reason 
for  commendation  from  both  the  officials  and 
the  employees.  Fifteen  years  ago  the  Balti- 
more &  Ohio  followed  suit.  In  1900  the 
Pennsylvania  Railroad  and  the  First  Na- 
tional Bank  of  Chicago  formulated  pension 
systems,  and  the  following  year  the  Penn- 
sylvania lines  west  of  Pittsburgh  and  the 
Illinois  Central  adopted  pension  plans.  In 
1902  the  Andrew  Carnegie  Relief  Fund,  with 
its  $4,000,000  benefaction  was  organized, 
and  half  a  dozen  important  railroads,  includ- 
ing the  Southern  Pacific  and  Canadian  Pa- 
cific, and  the  Chicago  and  Northwestern, 
became  convinced  that  the  method  was  wise. 

The  most  notable  step  which  has  been 
made  in  this  country  was  accomplished  this 
245 


Business  and  Education 

year  by  the  great  Carnegie  benefaction  of 
$10,000,000  for  providing  pensions  for  col- 
lege professors.  This  act  of  America's  great 
philanthropist  has  received  more  approval 
than  any  other  of  his  vast  benefactions,  and 
it  promises  a  marked  and  beneficial  effect  on 
our  whole  system  of  higher  education. 

As  a  rule  th'ose  American  corporations 
which  have  adopted  the  old-age  pensions 
system  have  treated  the  matter  in  the  light 
of  deferred  wages,  the  corporations  bearing 
the  entire  expense  of  the  pension  require- 
ments. The  method  of  the  Pennsylvania 
Railroad  is  typical  of  this  form. 

In  a  word,  the  Pennsylvania  Railroad 
retires  upon  a  pension,  all  officers  and  em- 
ployees compulsorily  at  the  age  of  seventy, 
and  may  retire  them  between  the  ages  of 
sixty-five  and  seventy,  provided  they  have 
been  thirty  years  in  the  service. 

The  amount  of  the  pension  varies  with 
the  years  of  service,  and  with  the  average 
monthly  pay  for  ten  years  preceding  retire- 
ment. The  average  monthly  pay  for  ten 
years  preceding  retirement  is  the  basis,  and 
the  pension  is  i  per  cent  of  that  amount  for 
each  year  of  service.  The  Company  reserves 
the  right  to  alter  this  basis  whenever  the 
allowance  made  under  it  shall  demand  an 
annual  expenditure  in  excess  of  $390,000. 

When  the  Pennsylvania  officials  were  ex- 
246 


Old- Age  Pensions  for  Worhmgrnen 

amining  the  subject,  they  found  that  nearly 
every  important  railroad  system  in  the  world, 
outside  of  America,  had  provided  in  some 
form  for  the  retirement  of  old  employees. 
The  basis  of  the  plans  adopted  by  all  the 
foreign  corporations  and  governments  con- 
templated contributions  on  the  part  of  the 
employees.  That  was  not  in  accordance 
with  the  ideas  of  the  Pennsylvania  officials. 
In  that  case  the  Company  wished  to  assume 
all  the  expense  involved,  and  in  that  respect 
the  practice  of  the  Pennsylvania  Company 
and  of  most  other  American  corporations  is 
at  variance  with  the  accepted  practice  else- 
where in  the  world.  Another  method,  of 
which  a  typical  example  is  that  of  the  First 
National  Bank  of  Chicago,  provides  for  con- 
tributions to  the  pension  fund  by  both  em- 
ployer and  employee. 

In  respect  to  the  age  of  retirement  there 
is  a  fair  amount  of  unanimity  in  all  plans. 
The  majority  of  the  schemes  fix  the  age 
at  sixty-five.  A  number  of  them,  the  Penn- 
sylvania Railroad  being  an  example,  give 
some  play  to  the  judgment  of  employing 
officers  so  far  as  the  retention  of  employees 
between  the  ages  of  sixty-five  and  seventy 
is  concerned.  The  Carnegie  Company  re- 
tires men  at  the  age  of  sixty,  and  the  Grand 
Trunk  Railway  of  Canada  at  the  age  of 
fifty-five. 

247 


Business  and  Education 

As  a  general  rule,  in  the  plans  thus  far 
adopted  in  this  country,  specified  length  of 
service  is  required  as  a  condition  precedent 
to  obtaining  a  pension.  The  Canadian  Pa- 
cific, Illinois  Central,  and  Baltimore  &  Ohio 
Railroads  have  fixed  that  term  of  service  at 
ten  years.  The  Carnegie  Company  and  the 
First  National  Bank  of  Chicago  fixed  it  at 
fifteen.  The  Southern  Pacific  and  its  allied 
lines  make  it  twenty  years,  while  the  Penn- 
sylvania Railroad  and  a  number  of  Eastern 
roads  made  it  necessary  for  an  employee  to 
have  been  thirty  years  in  their  service.  On 
the  other  hand,  the  Philadelphia  &  Reading 
has  adopted  a  very  broad  plan.  On  that 
railroad  any  faithful  employee,  irrespective 
either  of  age  or  of  length  of  service,  who 
receives  injuries  in  the  performance  of  duty, 
or  becomes  incapacitated  through  sickness, 
may  be  awarded  such  a  pension  as  the 
president  determines. 

Practically,  without  exception,  those 
American  railroads  which  have  adopted  the 
pension  system  provide  the  entire  fund  out 
of  which  pension  allowances  are  paid.  The 
Grand  Trunk  Railway  requires  a  contribu- 
tion of  2^^  per  cent  of  the  monthly  wages. 
The  First  National  Bank  of  Chicago  requires 
a  contribution  of  3  per  cent.  While  the 
employee  contributes  to  the  fund,  provision 
is  always  made  for  the  return  of  his  pay- 
248 


Old- Age  Pensions  for  WorJcmgmen 

ments  in  case  he  severs  his  connection  with 
the  service. 

If  I  were  to  attempt  to  summarize  the 
reasons  why  institutions  in  the  United  States 
are  beginning  to  adopt  old-age  pension 
schemes,  I  would  say  that  they  embrace  such 
considerations  as  these: 

The  pension  attaches  the  employee  to  the 
service  and  thus  decreases  the  liability  to 
strike.  It  makes  more  certain  a  continuance 
of  efficient  men  in  the  lines  of  work  with 
which  they  are  perfectly  familiar.  Of  quite 
as  much  importance  is  the  fact  that  a  pension 
system  enables  employers  to  dispense  with 
the  elderly  and  inefficient,  and  thus  gives 
constant  encouragement  to  good  effort  on 
the  part  of  younger  men  hoping  for  promo- 
tion. When  employees  realize  that  unsatis- 
factory conduct  may  at  any  time  lose  them 
not  only  their  present  positions,  —  a  loss 
which  in  such  a  labor  market  as  ours  might 
be  easily  made  good,  —  but  that  it  entails 
further  the  loss  of  a  very  valuable  asset,  the 
employee's  right  to  a  pension,  the  incentive 
to  good  conduct  is  greatly  increased.  It 
operates  especially  as  an  incentive  to  hold 
men  between  the  ages  of  forty  and  fifty  when 
they  have  acquired  the  experience  and  skill 
which  makes  them  especially  valuable,  and 
prevents  their  being  tempted  away  by  slightly 
increased  wages  for  a  temporary  period. 
249 


Business  and  Education 

Those  business  institutions  which  have 
adopted  the  old-age  pension  scheme  have 
not  done  so  from  sentimental  considerations, 
but  rather  from  considerations  of  economy 
and  efficiency  of  administration.  They  have 
found  that  when  provision  is  made  for  those 
who  are  too  old  to  render  efficient  service, 
every  employee  in  the  service  who  recognizes 
that  at  some  time  he  may  become  eligible  to 
such  benefits  will  be  under  strong  induce- 
ments for  good  behavior.  In  financial  insti- 
tutions particularly,  if  men  are  removed 
from  anxiety  for  the  future,  they  are  much 
more  apt  to  devote  their  best  efforts  exclu- 
sively to  their  careers  and  to  be  in  less  danger 
of  diverting  their  energies  into  side  channels 
of  money-making  —  channels  which  may 
easily  lead  them  on  to  dangerous  ground. 

No  one  can  doubt  that  there  is  weight  in 
these  reasons.  On  the  other  hand,  they  cer- 
tainly do  not  in  themselves  offer  sufficient 
ground  for  us  to  jump  to  the  conclusion  that 
we  are  ready  for  a  compulsory  system  of  old- 
age  pensions  which  should  be  under  the 
Government's  supervision.  With  such  study 
as  I  have  been  able  to  give  to  the  subject,  I 
should,  at  the  present  time,  summarize  my 
conclusions  as  not  going  further  than  to  say 
that  it  is  eminently  a  subject  for  careful 
painstaking  study.  I  do  not  believe  the 
German  system  could  be  transplanted  here 
250 


Old- Age  Pensions  for  Worhmgmen 

in  anything  like  its  entirety.  I  am,  however, 
perfectly  confident  that  those  features  of  the 
German  system  pertaining  to  sick  and  acci- 
dent insurance  are  of  enormous  value  to  the 
national  economy,  and  are  producing  results 
out  of  all  proportion  to  their  cost. 

That  there  is  to  be  development  of  the 
industrial  pension  idea  is  as  inevitable  as  the 
working  of  the  laws  of  economic  progress, 
and  whether  that  development  should  be 
directed  by  the  Government,  or  whether  it 
can  best  find  expression  through  the  indi- 
vidual action  of  corporations,  I  am  not  pre- 
pared to  offer  an  opinion.  The  thing  that 
I  do  thoroughly  believe,  however,  and  the 
one  conclusion  which  I  have  formed,  and  the 
one  which  seems  to  me  you  ought  not  to  find 
difficulty  in  agreeing  with,  is  that  the  subject 
is  worthy  of  thorough  scientific  study.  I 
believe  the  Commercial  Club  would  be  ren- 
dering a  service  of  great  value  to  the  country 
if  it  would  either  undertake  on  its  own  be- 
half, or,  perhaps  preferably,  would  use  its 
great  influence  to  get  the  President  or  Con- 
gress to  undertake,  a  thorough  investigation 
of  the  whole  problem.  There  is  a  scarcity  of 
literature  in  English  on  the  subject,  and 
what  has  been  printed  is  now  mainly  in  the 
form  of  scattered  articles  and  buried  reports. 

A  commission  which  would  give  the  sub- 
ject a  thorough  investigation  and  would  put 

251 


Business  and  Education 

the  results  of  that  investigation  into  such 
shape  that  we  could  grasp  the  significance 
of  what  has  been  done  would  be  of  great 
value.  I  believe  it  is  worth  the  while  of  such 
men  as  you  to  give  impetus  to  such  a  move- 
ment, to  throw  your  influence  on  the  side  of 
a  complete  inquiry  into  all  the  phases  of  this 
subject.  If  to  do  this  accords  with  your 
judgment,  I  am  confident  that  an  inquiry  so 
instituted  will  be  followed  by  results  that 
will  be  of  very  great  economic  importance  to 
the  nation. 


252 


AMERICANS    FOREIGN    COMMERCE 

An  address  delivered  before  the  Chamber  of  Commerce 
of  Wilmington,  North  Carolina,  September,  1902. 

We  are  all  aware  that  we  are  in  a  unique 
period  of  commercial,  financial,  and  indus- 
trial development.  It  is  undoubtedly  the 
most  important,  the  most  remarkable  and 
the  most  interesting  period  of  industrial  and 
financial  evolution  in  the  history  of  the 
nation.  We  have  witnessed,  in  the  last  half 
dozen  years,  a  commercial  expansion  and  a 
financial  movement  alike  unparalleled  in  the 
achievements  of  our  own  country  or  in  the 
growth  of  other  lands. 

These  half  dozen  years  have  been  produc- 
tive of  statistical  totals  bewildering  in  their 
magnitude,  —  of  industrial  expansion  un- 
paralleled either  in  volume  or  in  significance ; 
of  widening  financial  influence;  of  broad- 
ening credit  operations ;  of  banking  develop- 
ment, —  all  marking  growth  so  great  that 
it  is  becoming  difficult  for  us  to  view  with 
a  correct  and  rational  perspective  the  phe- 
nomena marked  by  these  new  totals. 

Familiar  as  you  all  are  with  the  salient 
features  of  this  development,  I  wish  for  a 
moment  to  emphasize  a  few  of  the  more 
253 


Business  and  Education 

noteworthy  facts.  I  do  not  want  to  weary 
you  with  any  statistical  catalogue,  but  only 
to  indicate  in  the  most  general  way  some  of 
the  features  of  this  remarkable  period. 

In  the  domestic  field  we  have  had  both  a 
series  of  extraordinary  crop  years  and  a 
period  of  extraordinary  industrial  activity. 
On  the  agricultural  side,  we  have  seen  the 
annual  value  of  farm  products  increase  far 
over  a  billion  dollars  in  the  last  half  dozen 
years,  and  we  have  seen  the  value  of  the 
farms  themselves  advance  more  than  four 
billion  dollars  in  the  same  time.  In  the 
industrial  field,  we  have  had  a  period  of  the 
fullest  employment  of  labor  (except  where 
labor  has  chosen  to  refrain  from  work),  and 
of  the  highest  general  level  of  wages  which 
has  ever  been  known,  either  with  us  or  with 
any  other  people.  The  definite  evidence  of 
this  prosperity  we  have  seen  in  a  doubling 
of  the  individual  deposits  in  national  banks, 
the  total  going  up  from  roundly  a  billion  six 
hundred  millions  in  1896  to  three  billion  two 
hundred  millions  this  year.  In  the  same 
time  the  deposits  of  savings  banks  have  in- 
creased seven  hundred  millions,  the  deposits 
in  State  banks  a  thousand  millions  —  con- 
siderably more  than  doubling  the  total  of  six 
years  ago  —  and  the  deposits  in  trust  com- 
panies also  more  than  doubling,  the  increase 
there  being  six  hundred  million.  In  these 
254 


Americans  Foreign  Commerce 

half  dozen  years  the  credits  represented  by 
individual  deposits  in  banks  of  all  classes 
have  increased  roundly  four  billion  dollars, 
an  increase  nearly  equal  to  the  total  deposits 
of  all  kinds  half  a  dozen  years  ago. 

Bank  clearings  —  an  excellent  measure 
of  general  trade  —  increased  in  these  half 
dozen  years  150  per  cent,  and  it  is  estimated 
that  the  total  wealth  of  the  country  has  had 
more  than  twenty  billion  dollars  added  to  it 
in  that  period. 

We  have  increased  our  coal  production  one 
hundred  million  tons,  and  passed  easily  to 
the  position  of  the  greatest  of  coal-producing 
nations.  We  have  almost  trebled  our  pro- 
duction of  steel,  leaving  our  competitors  far 
behind  in  any  comparison  of  volume  of  busi- 
ness. We  have  added  four  hundred  million 
dollars  to  the  annual  product  of  our  mining 
industries. 

So  the  catalogue  might  be  indefinitely 
extended,  with  ever-increasing  totals  and 
more  and  more  confusing  aggregates  of 
almost  incomprehensible  numbers.  In  a 
word,  whichever  way  we  turn  we  find  that 
the  figures  measuring  the  volume  of  busi- 
ness, the  extent  of  industry,  the  growth  of 
financial  importance,  have  in  these  last  half 
dozen  years  made  an  apparent  gain  equal  to 
the  entire  total  six  years  ago.  It  is  hardly 
too  much  to  say  that  in  six  years  we  have 
25s 


Business  and  Education 

doubled  the  figures  measuring  the  apparent 
extent  of  our  annual  domestic  business. 

Now,  for  a  moment,  to  turn  from  the 
domestic  side  of  the  account  to  the  foreign 
situation.  Here  we  have  recorded  gains 
which  have  given  deep  concern  to  the  whole 
commercial  world.  We  passed  the  billion- 
dollar  mark  with  our  exports  in  1896,  and 
in  five  years  more  the  total  stood  just  under 
a  billion  and  a  half.  At  the  same  time  our 
imports  were  declining,  so  that  we  were  not 
only  making  wonderful  inroads  upon  foreign 
markets,  but  we  were  more  than  holding  our 
own  in  our  own  markets  in  competition  with 
foreign  manufacturers.  Our  foreign  trade 
balances  began  to  show  incredible  totals  in 
our  favor,  running  up  well  over  six  hundred 
millions  a  year,  and  causing  the  gravest 
apprehension  in  the  minds  of  our  commercial 
rivals  in  regard  to  the  industrial  readjust- 
ment which  the  world  must  look  forward  to 
if  such  totals  were  to  be  maintained.  In  a 
single  year  we  imported  one  hundred  and 
five  millions  of  gold.  The  world  sud- 
denly discovered  that  we  were  not  alone 
its  granary,  but  we  were  likely  to  become 
its  workshop.  We  pushed  into  the  foreign 
markets  with  the  handiwork  of  our  me- 
chanics and  the  products  of  our  machines, 
month  by  month  increasing  our  sales,  until 
from  a  total  of  less  than  two  hundred  mil- 
256 


Americans  Foreign  Commerce 

lions  of  exports  of  manufactures  we  had 
soon  far  exceeded  four  hundred  milhons, 
making  increases  so  rapid  that  Europe  was 
brought  face  to  face  with  the  problem  of 
reorganization  of  her  industries  to  meet  this 
new-born  competition,  and  a  readjustment 
of  her  finances  to  pay  for  her  increased  pur- 
chases, which  she  seemed  unable  to  offset  by- 
increased  sales. 

I  had  the  privilege  a  year  ago  of  meeting 
many  of  the  foremost  statesmen  and  finan- 
ciers of  Europe,  and  of  discussing  with  them 
the  commercial  questions  which  had  been 
raised  by  our  rapid  industrial  development, 
and  by  our  wholesale  invasion  of  their 
markets.  Everywhere  I  found  the  problem 
receiving  most  serious  attention.  Every- 
where it  was  regarded  as  the  most  vital  of 
economic  questions,  and  nowhere  did  I  find 
anything  but  wonder  over  the  development 
which  we  were  showing  and  apprehension 
in  regard  to  the  effect  of  its  continuance. 
Where  it  was  to  lead  in  its  effect  upon  Euro- 
pean industries  and  European  finances,  if  it 
were  to  continue,  was  the  unsolvable  prob- 
lem of  finance  ministers,  bankers,  and  indus- 
trial captains.  I  had  the  privilege  of  a  con- 
versation at  that  time  with  Germany's  most 
distinguished  financier  and  industrial  up- 
builder,  the  late  Georg  von  Siemens  —  the 
creator  of  the  Deutsche  Bank,  the  adviser 
17  257 


Business  and  Education 

of  the  Government,  the  originator  of  vast 
industrial  enterprises.  I  asked  him  what 
was  the  future  of  the  old  world  in  respect 
to  this  new  industrial  development  and  this 
sudden  show  of  financial  strength  in  Amer- 
ica. I  asked  him  what  was  to  be  the  result, 
if  we  were  to  go  on  selling  to  Europe  six 
hundred  millions  of  goods  a  year  more  than 
we  bought,  increasing  our  exports,  decreas- 
ing our  imports,  building  up  a  theoretical 
trade  balance  of  such  totals  as  were  new  in 
international  finance. 

Herr  von  Siemens  was  a  wise  and  an 
experienced  man.  He  had  passed  through 
crises  and  through  periods  of  inflation,  and 
he  viewed  the  outlook  with  calmness. 

"  I  am  not  concerned  about  what  will  hap- 
pen to  Europe  if  you  are  to  go  on  in  this 
triumphal  way,"  he  told  me,  "  because  you 
will  not  go  on.  There  will  be  something 
which  will  stop  you.  Something  always 
does  happen  in  such  a  situation  as  this,  and 
something  will  happen  now.  I  do  not  know 
what  it  is;  my  vision  is  not  broad  enough 
or  clear  enough  to  foresee  it,  but  you  will 
make  mistakes  and  a  halt  will  be  called." 

It  is  my  purpose  to-night  to  examine 
somewhat  critically  the  present  industrial 
and  financial  conditions,  with  a  view  to  see- 
ing if  this  shrewd  German  observer  was 
right,  with  a  view  to  determining  if  some- 
258 


Americans  Foreign  Commerce 

thing  has  happened  to  call  a  halt  in  our 
progress  toward  a  command  of  the  world's 
markets,  and  then  to  offer  you,  if  I  can, 
some  suggestions  as  to  why  it  is  that  we 
have  failed  to  keep  up  the  pace,  and  as  to 
what  can  be  done  to  remove  the  obstacles 
that  are  retarding  our  progress. 

I  am  just  back  from  another  European 
trip,  and  have  again  met  many  of  the  most 
distinguished  of  European  statesmen  and 
financiers.  The  change  that  the  year  has 
made  in  their  point  of  view  is  extremely 
interesting.  They  are  no  longer  fascinated 
by  our  progress.  Instead  of  that,  I  found 
in  every  capital  I  visited,  and  in  the  mind 
of  almost  every  keen  observer  of  interna- 
tional affairs  with  whom  I  conversed,  a  belief 
that  we  have  for  the  present  marked  the 
high-water  point  of  our  overflow  of  exports 
into  the  European  industrial  field.  And  in- 
stead of  credulous  belief  in  the  unlimited  pos- 
sibilities of  our  development,  which  seemed 
to  be  the  average  state  of  mind  a  year  ago, 
there  is  to-day  a  feeling  of  grave  conserva- 
tism and  anxious  interest  in  our  future. 

They  note  that  the  rapid  increase  of  our 
exports  came  to  a  halt  two  years  ago.  They 
note  that  our  imports  in  the  last  two  years 
have  been  rapidly  rising,  the  record  for  the 
fiscal  year  just  closed  being  more  than  nine 
hundred  million  dollars,  against  only  a  little 

259 


Business  and  Education 

over  six  hundred  millions  in  1898.  They 
note  too,  that  in  spite  of  that  tremendous 
balance  of  trade  which  Government  reports 
showed  in  our  favor,  a  balance  running,  as 
I  have  said,  up  to  an  average  of  almost  six 
hundred  millions  a  year,  we  do  not  seem  to 
have  any  unusual  command  upon  interna- 
tional credits,  but  we  are  as  a  matter  of  fact 
a  considerable  debtor  in  the  world's  ex- 
changes, and  that  now,  in  the  midst  of  ex- 
traordinarily bountiful  harvests,  and  at  the 
season  when  a  movement  of  gold  in  this 
direction  might  normally  be  expected  —  we 
are  concerned  lest  a  high  rate  for  sterling 
shall  lead  to  gold  exports. 

If  we  are  honest  with  ourselves,  we  must 
admit  that  the  edge  is  off  our  invasion  of 
foreign  markets.  Our  totals  are  still  colos- 
sal, but  the  rate  of  increase  which  they  were 
making  has  been  checked,  and  decreases  have 
been  recorded.  Our  exports  of  manufactures 
for  the  fiscal  year  just  closed  are  thirty 
million  dollars  less  than  the  point  they 
reached  two  years  ago.  Our  total  exports 
of  domestic  merchandise  fell  off  more  than 
a  hundred  million  dollars  in  the  year.  In- 
stead of  decreasing  imports  we  have  made 
some  large  increases  in  our  purchases  of 
foreign  goods,  and  the  total  for  this  fiscal 
year  stands  more  than  three  hundred  million 
dollars  above  1899. 

260 


Americans  Foreign  Commerce 

If  we  chose  to  examine  critically  our  do- 
mestic condition  we  might  find  there,  too, 
developments  not  in  every  respect  satisfac- 
tory. It  must  be  with  the  keenest  regret 
that  we  recognize  unfavorable  conditions 
that  threaten  a  break  in  the  unparalleled 
magnificence  of  this  story  of  industrial 
growth.  Nothing  will  better  repay  thought 
and  study  than  inquiry  into  those  causes, 
which  seem  to  imperil  a  continuance  of  this 
wonderful  period  of  prosperity.  Nor  can 
any  investigation  be  of  more  vital  impor- 
tance than  a  consideration  of  what  safe- 
guards it  is  possible  for  us  to  provide  against 
the  recurrence  of  these  cycles  of  depression 
which  seem  always  to  follow  periods  of 
prosperity. 

It  is  not  my  purpose,  however,  to  dwell 
upon  some  of  the  evidences  of  inflation,  upon 
a  too  free  issue  of  securities  larger  than  the 
value  of  properties  warrant,  and  more  rapid 
in  creation  than  investors  can  absorb,  nor 
upon  labor  conditions  fraught  with  serious 
menace,  which  already  mark  their  effect 
upon  industrial  totals.  Instead  of  a  broad 
survey  of  the  whole  situation,  I  wish  to  take 
up  a  single  phase  of  it,  a  phase  which  has 
been  well  illustrated  by  a  recent  episode  in 
financial  affairs. 

In  cataloguing  the  splendid  list  of  indus- 
trial and  commercial  achievements,  I  have 
261 


Business  and  Education 

been  telling  a  story  that  is  old  to  your  ears. 
The  totals  are  so  wonderful  as  to  remain 
fresh  with  interest,  but  they  present  a  view 
of  the  situation  which  has  now  for  several 
years  been  pretty  well  fixed  in  the  minds  of 
all  of  us.  Statistics  are  wearisome.  In  an 
after-dinner  talk  they  are  almost  unpardon- 
able. But  I  am  going  to  ask  you  to  give 
attention  to  a  few  more  figures,  and  I  regret 
that  they  are  figures  that  cannot  be  looked 
upon  with  the  degree  of  satisfaction  with 
which,  in  the  last  three  or  four  years,  we 
have  been  wont  to  regard  all  of  our  com- 
mercial statistics. 

The  Comptroller  of  the  Currency,  a  few 
days  ago,  completed  his  report  showing  the 
condition  of  all  national  banks  last  month. 
That  report,  it  seems  to  me,  is  one  of  the 
most  significant  that  has  in  a  long  time  come 
from  the  Comptroller's  office,  and  it  will 
well  bear  some  analysis  and  comparison. 
If  we  are  merely  looking  for  large  totals,  we 
may  again  find  them  here,  figures  in  some 
respects  surpassing  all  previous  records. 
The  total  deposits,  individual,  bank,  and 
Government,  in  all  national  banks,  foot  up 
four  billion  five  hundred  and  twenty-seven 
million  dollars.  Now,  if  we  turn  back  to  a 
similar  report  for  the  beginning  of  1899, 
we  will  find  the  total  of  the  same  items 
three  billion  two  hundred  and  twenty-six 
262 


Americans  Foreign  Commerce 

millions.  Now,  for  a  moment,  bear  these 
figures  in  mind.  Roughly,  four  billion  and 
a  half  deposits  now,  against  three  billion  two 
hundred  million  in  1899  —  and  with  that 
increase  in  the  liabilities  of  national  banks 
in  mind,  let  us  look  at  the  figures  represent- 
ing the  reserve  basis.  The  total  of  specie 
and  legal  tenders  held  by  the  national  banks 
last  month  was  five  hundred  and  eight  mil- 
lions. The  total  at  the  beginning  of  1899 
was  five  hundred  and  nine  millions.  Here 
we  have  had  an  expansion  of  a  billion  three 
hundred  millions  in  deposits,  while  the  basis 
of  gold  and  legal  tenders,  upon  which  that 
inverted  pyramid  stands,  is  actually  slightly 
smaller  than  it  was  at  the  beginning  of  the 
period.  Now,  in  that  same  time  the  deposits 
of  other  banks  —  State  banks,  trust  com- 
panies, savings  banks,  and  private  banks  — 
have  probably  increased  not  far  from  three 
billion  dollars,  and  there  is  little  likelihood 
that  their  gold  and  legal  tender  reserve  is 
materially  larger  than  —  if  it  is  as  large  as 
—  at  the  beginning  of  1899.  We  have  had 
then  in  less  than  four  years  an  increase  in 
the  total  bank  deposits  of  the  country  of 
over  four  billion  dollars,  accompanied  by  no 
increase  in  the  specie  and  legal  tender  hold- 
ings of  those  banks. 

What  has  brought  about  this  remarkable 
development  of  bank  credit?     The  answer 
263 


Business  and  Education 

must  at  once  come  to  the  mind  of  any  ob- 
server of  finance,  that  the  principal  reason 
for  the  expansion  of  deposits  and  the  accom- 
panying expansion  of  loans  is  to  be  found 
in  the  great  movement  which  has  been  the 
significant  feature  in  financial  affairs  of  the 
last  half  dozen  years  —  the  movement  to 
aggregate  industrial  establishments  into 
single  great  corporate  units,  and  to  convert 
the  evidence  of  ownership  into  corporate 
securities  which  have  entered  actively  into 
the  stream  of  financial  operations.  Vast 
amounts  of  new  securities  have  been  created 
in  these  half  dozen  years,  based  in  large 
measure  upon  properties  which  were  before 
held  as  fixed  investments  by  individuals,  or 
if  standing  in  the  form  of  corporate  prop- 
erty, the  securities  of  those  corporations 
were  more  closely  held,  and  in  but  small 
measure  entered  into  the  financial  operations 
of  the  day.  This  movement  —  tending  to 
convert  the  evidence  of  ownership  of  a  great 
amount  of  fixed  property  into  a  form  which 
has  been  considered  a  bank  collateral,  and 
which  has  been  made  the  basis  of  loans  and 
of  corresponding  increases  of  deposits,  is 
undoubtedly  the  most  important  single  cause 
for  this  increase  of  more  than  four  billion 
dollars  in  bank  deposits  and  bank  loans  of 
the  country  in  the  space  of  three  or  four 
years. 

264 


Americans  Foreign  Commerce 

Another  important  contributing  influence 
has  been  the  vast  expenditures  of  corpora- 
tions —  railroad  companies  particularly  — 
for  the  improvement,  betterment,  and  exten- 
sion of  their  properties.  New  securities  have 
been  created,  and  the  capital  which  was  ob- 
tained by  their  sale  has  been  converted  into 
a  fixed  form  of  investment.  When  our  rail- 
roads were  first  built  economy  in  construc- 
tion was  the  prime  consideration.  Now  it 
has  come  to  be  that  economy  in  operation  is 
demanded.  At  first  it  was  economy  in  the 
use  of  capital ;  now  it  is  economy  in  the  use 
of  labor.  And  so  we  have  seen,  not  only 
with  the  railroads,  but  in  every  department 
of  industry,  a  lavish  investment  of  capital 
in  order  that  the  cost  of  production  might  be 
cheapened. 

Now  let  us  suppose  that  all  this  great  ex- 
penditure has  been  wisely  made,  and  in  the 
main  I  believe  that  it  has,  that  every  dollar 
which  has  been  expended  in  the  improvement 
and  betterment  of  railroads,  in  the  extension 
and  better  equipment  of  industries,  will  efifect 
economies  which  will  result  in  a  saving 
equal  to  a  fair  interest  return  on  the  capital 
so  invested.  But,  granting  that  the  invest- 
ment, from  that  point  of  view,  has  been  wise, 
a  consideration  which  we  have  perhaps  in 
some  measure  lost  sight  of  is  that  this  whole 
great  movement  of  improvements  and  better- 
265 


Business  and  Education 

ments  has  been  drawing  from  the  fund  of 
Hquid  capital  and  converting  it  into  a  fixed 
form,  so  that  such  capital  cannot  be  fully 
returned  into  liquid  shape,  from  the  result 
of  increased  earnings,  before  the  next  ten 
or  fifteen  years. 

If  a  farmer  were  to  ask  a  country  bank  to 
loan  him  ten  thousand  dollars  to  put  up  new 
buildings  and  generally  improve  his  prop- 
erty, the  banker,  while  admitting  that  the 
expenditure  might  be  a  profitable  one  in  the 
added  return  which  the  farm  would  give, 
would  say  that  the  proposal  was  not  a  good 
banking  proposition,  that  bank  funds  could 
not  properly  be  tied  up  in  an  investment  of 
that  character,  but  must  be  loaned  for  ob- 
jects which,  in  the  natural  order  of  the  com- 
mercial season's  progress,  would  liquidate 
the  debt  in  a  much  shorter  time  than  would 
be  possible  were  the  capital  to  be  converted 
into  such  a  fixed  form  of  investment.  Rec- 
ognizing this  principle,  the  National  Bank- 
ing Act  very  wisely  prohibits  loaning  upon 
real  estate.  Sound  as  the  security  is,  it  is 
not  within  the  lines  of  the  banking  principle 
which  embodies  the  practice  of  making  only 
such  loans  as  will  in  the  natural  order  of 
business  liquidate  themselves  within  a  few 
months. 

If  a  railway  manager  were  to  ask  from 
his  larger  bankers  a  million-dollar  loan  to 
266 


America's  Foreign  Commerce 

put  into  better  bridges  and  heavier  track, 
the  same  answer  would  be  made.  It  would 
be  unwise  for  a  bank  so  to  tie  up  active 
capital  by  converting  it  into  a  fixed  form  of 
investment.  Profitable  as  the  banker  might 
be  convinced  the  investment  would  be  in  the 
greater  economies  which  it  would  bring  to 
the  operation  of  the  railroad,  he  would  see 
that  it  would  be  unwise  financiering  for  him 
to  loan  his  deposits  for  conversion  into  a 
fixed  form  of  investment  which  could  not  be 
liquidated  should  his  depositors  begin  to  re- 
duce their  deposit  lines.  Securities  issued 
for  just  such  purposes,  however,  form  much 
of  the  basis  of  this  increase  of  four  billions 
of  loans.  The  loans  are  excellent  so  long 
as  A  can  sell  his  collateral  to  B  should  A  be 
called  upon  to  repay,  but  if  A  and  B  should 
both  be  called  upon  to  pay,  there  is  nothing 
in  the  nature  of  these  loans  which  will  per- 
mit them  rapidly  to  work  out  toward  liqui- 
dation in  the  natural  order  of  things.  It  is, 
in  effect,  a  loaning  of  bank  credit  for  con- 
version into  a  fixed  form  of  property. 

If,  say,  two-thirds  of  the  total  income 
from  industrial  investments  were  to  be  re- 
turned to  the  betterment  of  properties,  and 
there  should  be  issued  in  place  of  the  capital 
so  spent  additional  securities,  the  process 
would  be  wise  and  beneficial,  If,  on  the 
other  hand,  there  should  be  converted  into 
267 


Business    and    Education 

the  form  of  fixed  property  by  expenditures 
for  improvements  and  betterments,  a  total 
amount  of  capital  considerably  exceeding  the 
total  annual  income  from  such  investments, 
the  result  in  the  end  could  lead  only  to  dis- 
aster, no  matter  how  wisely  these  expendi- 
tures for  betterments  and  improvements 
might  be  made  —  because  in  the  process 
there  would  be  absorbed  a  larger  and  larger 
amount  of  liquid  capital  into  the  form  of 
fixed  investment,  banking  reserves  would  be 
reduced,  and  when  bank  deposits  were  de- 
manded, though  there  might  be  the  sound- 
est of  security  back  of  them,  it  would  be  in 
a  fixed  form  unavailable  for  liquidating  the 
debts  due  to  depositors. 

It  must  be  admitted,  I  believe,  that  we 
have  been  converting  too  great  an  amount 
of  liquid  capital  into  fixed  forms  of  invest- 
ment. What  is  the  cure?  The  cure  is,  of 
course,  to  reduce  the  expenditures  of  that 
character  so  that  they  will  come  within  the 
line  of  safety.  What  is  the  line  of  safety? 
It  is,  it  seems  to  me,  something  well  within 
the  total  income  from  such  investments. 
If  we  go  beyond  it,  —  if  we  convert  into 
fixed  forms  of  property  more  than  the  total 
income  from  the  property,  —  we  have  gone 
beyond  the  line  of  safety  and  are  borrow- 
ing from  the  future  temporarily  to  bury 
the  capital.  We  have  the  choice  of  one 
268 


America's  Foreign  Commerce 

of  two  things:  Either  to  practise  wise 
discretion  or  to  go  on  borrowing  of  the 
future  until  we  are  brought  up  against  a 
wall.  The  first  course  is  consistent  with 
continued  prosperity,  even  if  we  do,  to  some 
extent,  reduce  the  expenditure  of  capital 
for  new  construction,  extensions,  and  better- 
ments. The  second  course,  if  persisted  in, 
will  bring  confusion,  disorder,  and  paralysis 
on  the  whole  constructive  investment. 

Another  phase  of  this  situation,  and  one 
which  has  aggravated  the  causes  leading  to 
an  expansion  of  loans,  and  which  has  cut 
off  from  us  the  relief  which  we  hoped  for 
in  the  way  of  a  foreign  trade  balance  made 
tangible  by  gold  imports,  has  been  the  rapid- 
ity and  extent  of  the  advance  in  prices. 
Back  in  1895  ^^^  1896  we  were  on  a  low 
level  of  prices,  and  we  were  imbued  with 
economical  ideas  of  administration.  It  was 
then  that  we  began  making  the  great  inroads 
into  foreign  markets  and  our  exports  passed 
the  billion-dollar  mark.  In  1898  our  ex- 
ports had  so  increased  and  our  imports  so 
decreased  that  we  had  a  balance  in  our  favor 
of  more  than  six  hundred  millions,  and  that 
balance  was  tangibly  reflected  that  year  in  a 
net  importation  of  one  hundred  and  five  mil- 
lions of  gold.  Then  prices  began  to  rise,  the 
total  of  our  exports  did  not  hold  up  the  next 
year,  while  our  imports  began  to  show  a 
269 


Business    and   Education 

marked  increase.  In  the  subsequent  years  we 
were  fortunate  in  exceptionally  favorable  ag- 
ricultural conditions,  of  bountiful  harvests  at 
home  and  scantily  filled  granaries  abroad, 
so  that  our  exports  showed  some  further  in- 
creases, but  our  imports  went  up  more  rapidly 
than  did  our  exports  until,  in  the  fiscal  year 
just  closed  we  showed  a  total  of  imports  nearly 
three  hundred  millions  more  than  in  1898. 

The  whole  general  level  of  prices  has  ad- 
vanced, and  some  of  these  advances,  from 
the  extreme  low  level  of  1897  or  1898  to  the 
high  level  which  has  been  reached  within  the 
last  two  years,  are  the  sharpest  in  our  com- 
mercial history.  \  Pig  iron,  for  instance,  ad- 
vanced from  less"  than  $12  a  ton  in  October, 
1898,  to  $25  at  the  beginning  of  1900.  Steel 
rails  doubled  in  the  same  period,  the  price 
going  up  from  $17.50  to  $35.  Bar  iron 
scored  even  a  greater  percentage  of  gain 
within  a  shorter  time,  the  price  advancing 
from  95c.  a  hundred  in  July,  1897,  to  $2.60 
in  October,  1899.  The  quotation  for  clear 
pine  boards  has  advanced  from  $45  to  $73 
a  thousand;  for  brick,  from  $4.50  to  $6; 
rope,  from  5 /4  c.  to  13c.;  and  salt,  from 
21C.  to  $1.  Take  the  advance  of  some  of 
the  Southern  products  in  that  same  period. 
We  see  linseed  oil  marked  up  from  29c.  to 
68c.,  turpentine  from  26c.  to  50c.,  molasses 
from  28c.  to  SSc.\ 

"^  270 


Americans  Foreign  Commerce 

These  extreme  advances  in  prices  have 
not  been  fully  maintained,  but  the  present 
level  of  market  quotations  is  still  50  to  80 
per  cent  above  prices  in  1897  and  1898  for 
many  commodities. 

So  the  list  might  be  continued.  These 
examples  are  extreme,  and  the  low  level  was 
probably  unduly  depressed.  But  they  tell 
the  story  of  why  our  exports  have  failed  to 
go  on  increasing,  and  they  have  been  an  im- 
portant influence  in  the  inflation  of  bank 
credits. 

When  a  railroad  company  had  to  pay  $35 
a  ton,  as  against  $17.50,  for  steel  rails,  its 
improvements  become  relatively  very  costly, 
and  its  issues  of  securities  against  permanent 
betterments  must  be  on  a  much  more  liberal 
scale.  The  cost  of  production  in  every  di- 
rection has  been  increased  until  we  find  our- 
selves actually  importing  from  some  of  the 
identical  markets  that  two  or  three  years 
ago  were  in  a  panic  over  our  invasion. 

Prices  of  securities  advanced  along  with 
other  prices,  and  attracted  the  holdings  of 
foreign  investors,  until  we  swept  the  con- 
tinent of  Europe  almost  clean  of  our  stocks 
and  bonds,  and  greatly  reduced  the  holdings 
of  English  investors. 

We  still  liad  an  ample  total  of  excess  of 
exports,  however,  and  out  of  our  favorable 
trade  balance  we  could  pay  for  reams  of 
271 


Business    and    Education 

securities  and  still  have  something  left.  We 
did  not  stop  at  buying  our  own  securities, 
but  began  making  great  foreign  investments, 
to  the  astonishment  of  the  financial  world, 
turning  the  tables  upon  Europe  and  sending 
a  great  stream  of  credit  for  investment  there. 
The  result  was  that  by  the  year  1900,  in  spite 
of  a  nominal  foreign  trade  balance  of  nearly 
five  hundred  and  fifty  millions  in  our  favor, 
the  net  result  of  the  gold  movement  that  year 
was  an  export  of  about  four  million  dollars. 
The  next  year  we  brought  in  a  few  more  mil- 
lions of  gold  than  we  sent  out,  and  we  did  the 
same  last  year,  but  since  1898  there  has,  in 
spite  of  the  theoretical  trade  balance,  been  no 
significant  shipment  of  gold  in  our  direction. 

There  has,  however,  been  a  movement  in 
international  finance,  which  is  not  reflected 
in  the  customs  statements.  We  have  been 
building  up  a  floating  debt  to  Europe,  made 
up  of  borrowings  in  the  form  of  short  time 
bills.  The  exact  total  of  that  floating  in- 
debtedness at  the  present  time  is  one  of  the 
difficult  problems  of  finance,  but  it  must  be 
very  large.  I  have  heard  it  estimated  by 
financiers  in  foreign  capitals  as  high  as  two 
hundred  to  three  hundred  millions.  That 
estimate,  I  believe,  is  far  too  high ;  but,  even 
so,  the  total  we  must  admit  is  important. 

Particularly  is  it  important  in  view  of 
the  statistics  of  bank  reserves,  to  which  I 
272 


America's  Foreign  Commerce 

have  before  referred.  In  1899  the  national 
banks  held  33  per  cent  of  reserve.  In  their 
vaults  was  a  good  part  of  the  one  hundred 
and  five  millions  of  gold  which  had  come  in 
from  abroad  the  preceding  year.  It  was  this 
excess  of  reserve  which  permitted  loans  to 
expand  one  billion  three  hundred  millions 
since  that  date  without  adding  a  dollar  to  the 
stock  in  the  bank  vaults  of  specie  and  legal 
tenders.  But  now  we  have  gone  to  the  limit 
in  that  respect.  This  last  report  shows  less 
than  21  per  cent  of  reserve  for  all  the  na- 
tional banks  of  the  country.  Not  one  of  the 
three  central  reserve  cities  was  up  to  the  legal 
limit.  Twenty-two  of  the  thirty  other  re- 
serve cities  were  below  the  legal  limit. 

We  have  seen  what  a  great  expansion  of 
deposits  and  loans  both,  remember,  almost 
wholly  but  evidences  of  bank  credit,  could 
follow  the  increase  in  the  reserve  basis  that 
came  with  the  gold  importations  of  1897 
and  1898.  We  see  from  this  last  statement 
of  the  Comptroller  that  the  expansion  has 
reached  the  utmost  limit  possible  with  the 
present  basis  of  specie  and  legal  tenders.  Is 
it  not  well  to  ask,  What  of  the  future?  If 
a  hundred-million-dollar  importation  of  gold 
can  serve  as  a  basis  for  an  expansion  of  so 
many  millions  of  deposits  and  loans,  what 
will  an  exportation  of  one  hundred  millions 
mean?    Will  not  the  answer  lead  us  to  pon- 

18  273 


Business    and    Education 

der  on  the  probable  effect  of  future  gold 
movements?  Does  our  foreign  commerce 
give  promise  of  a  trade  balance  great  enough 
again  to  induce  gold  to  flow  in  this  direction  ? 
Let  us  examine  recent  records.  For  the 
first  nine  months  of  this  year  our  imports 
increased  over  last  year  fifty-six  millions, 
and  it  must  be  remembered  that  the  total 
imports  for  last  year  were  three  hundred 
millions  more  than  in  1898.  On  the  other 
side  of  the  book,  our  exports  for  the  nine 
months  of  this  year  decreased  one  hundred 
and  eight  millions,  so  that  the  record  for  the 
nine  months  shows  a  net  balance  one  hun- 
dred and  sixty-four  millions  more  unfav- 
orable than  the  corresponding  nine  months 
of  the  previous  year.  In  the  same  time  we 
have  lost  eight  millions  of  gold.  For  the 
twelve  months  ending  with  September  our 
favorable  trade  balance  was  420  millions, 
against  641  millions  for  the  previous  twelve 
months,  a  decrease  of  two  hundred  and 
twenty-one  millions. 

The  evidences,  then,  of  advancing  prices 
that  check  exportation  and  increase  importa- 
tion, the  absorption  of  our  favorable  trade 
balance  in  foreign  investments  and  in  the 
repurchase  of  securities,  the  uncertain  totals 
of  our  floating  indebtedness  represented  by 
short-time  finance  bills,  all  taken  in  connec- 
tion with  the  fact  that  any  reduction  of  the 
274 


Americans  Foreign  Commerce 

specie  reserve  held  by  banks  must  be  fol- 
lowed by  liquidation  which  will  again  es- 
tablish the  proper  relation  between  reserve 
and  deposit  liability,  would  seem  at  least  to 
point  to  the  conclusion  that  this  is  not  a  time 
favorable  for  the  expansion  of  bank  credits. 
I  wish  by  no  means  to  present  an  alarm- 
ing view  of  the  outlook.  What  I  do  wish 
to  do  is  merely  to  sound  a  conservative  note 
of  warning.  I  believe  there  are  in  the  situa- 
tion tendencies  in  which  are  elements  of  pos- 
sible danger.  On  the  other  hand,  I  by  no 
means  forget  the  long  list  of  favorable  con- 
ditions upon  the  opposite  side  of  the  account. 
I  have  the  most  absolute  faith  in  our  ulti- 
mate commercial  ascendency.  I  believe  no 
one  who  has  carefully  studied  industrial  con- 
ditions in  this  country  and  in  Europe  can 
reach  a  conclusion  unfavorable  to  the  pros- 
pect of  our  own  progress.  We  have  the 
cheapest  and  most  nearly  inexhaustible  sup- 
ply of  raw  material,  the  greatest  genius  in 
the  handling  of  machinery  for  its  conversion 
into  manufactured  products,  the  broadest 
single  homogeneous  market  in  the  world 
upon  which  to  base  substantial  domestic 
business,  which  will  serve  as  a  foundation 
for  foreign  commercial  conquest.  We  have 
numerous  advantages  over  our  competitors, 
and  in  the  end  the  combined  effect  of  these 
advantages  is  absolutely  certain  to  place  us 
275 


Business    and    Education 

foremost  in  the  world's  commercial  ranks. 
It  is  in  no  wise  opposed  to  this  view  of  ulti- 
mate commercial  supremacy  —  a  view  which 
no  one  more  strongly  holds  than  I  do  — 
that  I  have  pointed  out  conditions  which  I 
believe,  if  not  guarded  against,  will  threaten 
for  the  time  being  our  continued  progress 
toward  that  goal.  A  judicious  recognition 
of  the  restricting  conditions  now  visible  in 
our  financial  situation  may  save  us  from 
disaster  and  humiliation  later  on,  —  a  humil- 
iation from  which  recovery  will  be  slow  and 
painful.  If  a  realization  of  these  dangers 
and  an  effort  to  avoid  them  shall  in  any 
measure  result  from  what  I  have  said  to 
you,  I  shall  consider  this  opportunity  for 
meeting  you  doubly  valuable. 


276 


THE    ULTIMATE    DEPENDENCE 

OF    NEW    ENGLAND    UPON 

FOREIGN    TRADE 

An  address  delivered  before  the  Commercial  Club  of 
Boston,  March  19,  1903. 

A  MOST  significant  and  interesting  feature 
of  the  American  commercial  situation  is  the 
marked  change  which  has  come  in  the  last 
two  years  in  the  attitude  of  our  people  to- 
ward foreign  trade.  In  the  period  just  fol- 
lowing the  Spanish  War,  the  dominating 
commercial  note  in  this  country  seemed  to 
be  sounded  in  praise  of  the  increase  of  our 
exports  and  the  extension  of  the  field  of'our 
foreign  trade.  That  note  rose,  indeed,  to  a 
trumpet  blast  when  our  exports  expanded  to 
a  point  that  gave  us  a  favorable  trade  bal- 
ance of  more  than  $600,000,000  in  a  single 
year.  The  commercial  world  stood  aghast 
at  the  strides  we  were  making  in  our  en- 
trance of  the  world's  markets.  It  came  to 
be  called  an  American  invasion  —  an  in- 
vasion without  force  of  arms,  but  as  pro- 
found in  its  effect  as  had  been,  in  days  gone 
by,  the  consequences  of  many  a  military 
277 


Busmess    and    Education 

triumph.  The  old  world  was  shocked  at  the 
tremendous  pace  of  our  progress.  Our  total 
exports  reached  a  billion  dollars,  and  we  were 
filled  with  commercial  pride,  but  almost  be- 
fore we  were  used  to  those  figures,  they  had 
expanded  five  hundred  millions  more,  and 
reached  a  point  nearly  double  their  average 
in  the  ten  years  prior  to  the  beginning  of 
this  period.  In  six  years  we  sold  abroad  in 
merchandise,  produce,  and  manufactures  two 
billion  dollars  more  than  we  bought.  And 
we  compared  that  colossal  figure  of  $2,000,- 
000,000  with  a  foreign  trade  balance,  built 
up  from  the  date  of  the  foundation  of  the 
Government,  through  all  the  years  up  to  the 
beginning  of  this  period,  which  aggregated 
only  one-sixth  of  that  six  years'  record. 
Our  exports  of  manufactured  articles 
jumped  $100,000,000  in  a  year,  and  fol- 
lowed up  that  increase  by  as  much  more  in 
another  twelve  months,  and  almost  in  a  day 
we  came  into  successful  competition  with 
markets  which  had  never  before  known  our 
products,  and  we  brought  defeat  in  commer- 
cial struggles  to  great  houses  which  had  for 
generations  known  no  successful  competi- 
tion. 

This  was  an  invasion  indeed,  and  properly 

we  took  a  great  national  pride  in  it.     But  in 

the  last  two  years  this  invasion  has  become 

almost  a  retreat.     Instead  of  our  manufac- 

278 


New  England  and  Foreign  Trade 

turers  supplying  our  home  demand  more 
fully  than  they  had  ever  supplied  it  before, 
and  wresting  market  after  market  from  es- 
tablished traditions  of  the  world's  trade,  we 
have  been  becoming  a  better  and  better  mar- 
ket to  sell  in  and  a  poorer  and  poorer  mar- 
ket in  which  to  buy.  Our  imports  have 
moved  up  steadily.  The  volume  of  our  ex- 
ports of  manufactures  has  ceased  to  show 
the  wonderful  expansion  which  marked  its 
period  of  development  when  was  coined  the 
phrase,  the  American  Commercial  Invasion. 
Not  only  have  the  statistics  of  the  situa- 
tion changed,  but  our  mental  commercial 
attitude  has  changed.  There  has  been  radi- 
cal variation  in  the  emphasis  of  our  com- 
mercial development.  We  find  to-day  a 
great  many  people  who  believe  that  this 
sudden  loss  of  interest  in  foreign  commerce 
is  a  natural  reaction  from  an  abnormal  con- 
dition. They  declare  that  a  nation  whose 
undeveloped  resources  are  as  vast  as  those 
of  the  United  States  had  best  confine  its  at- 
tention to  its  home  field ;  that  a  nation  where 
the  possibilities  of  internal  development  are 
only  beginning  to  be  realized,  even  in  local- 
ities long  since  fully  settled,  offers,  in  its 
great  homogeneous  markets,  attractions  to 
our  manufactures  which  make  any  possibil- 
ity of  foreign  trade  expansion  look  small  and 
cramped.  They  believe  that  a  nation  which 
279 


Business    and    Education 

has,  within  a  decade,  increased  the  capital 
invested  in  its  manufacturing  enterprises  by 
three  and  one-half  billion  dollars,  a  nation 
which,  in  that  same  ten  years,  has  shown  a 
growth  in  numbers  exactly  equal  to  the 
whole  population  of  Mexico,  offers  internal 
opportunities  greater  than  can  possibly  be 
found  in  the  well- worked  markets  of  the  old 
world.  A  nation,  they  think,  which  has  in- 
creased its  actual  production  of  coal  in  a 
decade  by  almost  as  much  as  the  whole  pro- 
duction of  its  greatest  competitor  at  the  be- 
ginning of  that  period,  which  has  nearly 
doubled  its  output  of  iron  in  the  same  length 
of  time,  and  in  that  field  also  passed  all  com- 
petitors, and  which,  for  both  of  these  great 
products,  is  offering  a  home  market  so  keen 
that  no  thought  of  export  can  be  entertained, 
a  nation  which  embraces  all  resources  and 
all  zones  within  its  boundaries,  —  such  a 
nation,  they  believe,  in  the  very  nature  of 
things,  cannot  be  permanently  dependent 
upon  foreign  trade.  They  point  to  the  rela- 
tive unimportance  of  even  our  expanded 
foreign  trade  if  we  compare  it  with  the 
vastly  more  rapidly  expanding  domestic 
commerce.  Measured  by  whatever  stand- 
ard one  will,  they  say,  the  predominating 
importance  of  the  domestic  markets  is  em- 
phasized. 

I  do  not  follow  that  line  of  reasoning  al- 
280 


New  England  and  Foreign  Trade 

together.  I  admit  that  it  has  great  force 
and,  speaking  broadly  for  the  whole  country, 
I  believe  that  paramount  to  any  possible  con- 
sideration of  foreign  trade,  in  the  present 
day  at  least,  is  the  importance  of  the  devel- 
opment of  our  domestic  markets,  and  the  im- 
portance, —  and  I  would  particularly  em- 
phasize this  point,  —  of  keeping  corporate 
and  financial  methods  directed  along  right 
economic  lines  which  will  leave  these  vast 
internal  commercial  interests  free  to  follow 
their  natural  lines  of  expansion.  Those  gen- 
eral considerations,  however,  are  not  equally 
applicable  to  all  parts  of  the  United  States. 
Least  of  all,  I  believe,  do  they  apply  to  the 
situation  of  New  England.  The  Middle 
States,  the  Mississippi  Valley,  and  the  South 
may,  indeed,  look  forward  to  a  commercial 
future  whose  confines  need  not  extend  be- 
yond the  national  boundaries,  but  I  believe 
that  for  the  New  England  States  any  large 
measure  of  future  prosperity  must  be  sought 
farther  afield. 

You  gentlemen  of  the  Commercial  Club, 
you  who  have  been  a  part  of  the  proud  com- 
mercial life  and  development  of  New  Eng- 
land, do  not  need  to  be  told  of  the  intimate 
identification  of  the  New  England  States 
with  the  industrial  growth  of  the  whole 
country.  The  view  which  I  have  per- 
sonally had  has  emphasized  in  my  mind 
281 


Business  and  Ediocation 

the  important  influence  of  the  New  Eng- 
land commercial  life  upon  the  development 
of  the  West.  It  is  the  view  of  the  outsider, 
the  Westerner,  but  it  leaves  me  none  the 
less  filled  with  respect  for  New  England's 
business  traditions.  New  England's  enter- 
prise. New  England's  initiative,  New  Eng- 
land's commercial  character.  I  hardly 
need  to  recall,  here  in  this  assemblage  of 
Boston  commercial  men,  anything  of  the 
historical  development  of  New  England's 
commercial  position,  anything  of  the  time 
when  the  foreign  commerce  of  the  country 
centred  at  this  port,  of  how  New  England 
built  the  ships  of  the  country,  and  how  New 
England's  merchants  were  the  boldest  and 
most  successful  traders  in  all  the  world's 
commerce;  nor  do  I  need  to  speak  of  these 
same  characteristics  in  the  development  of 
New  England's  industrial  life,  how  the  great 
manufacturing  industries  found  their  begin- 
nings here,  —  the  textile  industries,  the  ma- 
chine-tool industries,  the  rubber  and  leather ; 
even,  if  we  go  back  to  Revolutionary  times, 
we  find  the  iron  and  steel  industries,  in  their 
national  beginnings,  nurtured  in  the  con- 
genial atmosphere  of  this  Commonwealth. 
For  a  time  New  England  was  largely  self- 
centred,  her  own  people  were  busy  develop- 
ing her  own  resources.  The  accumulations 
of  half  a  century  of  profitable  trade  became 
282 


New  England  and  Foreign  Trade 

the  greatest  available  fund  for  the  develop- 
ment of  Western  prairies  and  for  opening 
Western  mines.  Great  railroad  corpora- 
tions, expanding  from  trunk  lines  into  sys- 
tems, were  built  up  and  controlled  by  New- 
England  capital.  But  better  than  the  send- 
ing forth  of  capital,  better  than  the  building 
of  railroads,  the  opening  of  mines,  the  or- 
ganization of  banking  institutions,  was  the 
impress  of  men  with  New  England  charac- 
ters, who  went  forth  to  all  the  States  from 
Ohio  to  the  Pacific,  so  that  a  greater  New 
England  has  come  to  stretch  clear  across  the 
continent,  and  New  England  methods  and 
New  England  consciences  are  leaven  in  the 
commercial  life  of  the  great  cities  of  the 
West  away  on  to  the  shores  of  Puget  Sound. 
An  unusual  phenomenon  was  at  last  pre- 
sented. Attracted  on  the  one  hand  by  the 
high  wages  of  the  West,  and  on  the  other 
by  the  free  lands,  and  at  home  pressed  by 
the  competition  of  Western  wheat  and  cat- 
tle, the  rural  New  Englander,  by  thousands, 
sought  more  attractive  occupations.  The 
Western  States  took  up  the  task  of  feeding 
the  fast-growing  populations  of  the  mill 
towns,  sending  their  food-stuffs  and  raw 
materials  in  exchange  for  the  manufactured 
goods  which  they  could  not  yet  make  in  the 
West.  New  England  may  be  credited  with 
a  vast  influence  in  the  Western  expansion 
283 


Business  and  Education 

of  the  United  States,  because  she  furnished, 
more  than  any  other  part  of  the  country, 
the  men,  the  money,  and  the  manufactures 
which  made  that  expansion  possible. 

That  movement,  however,  has  been  largely 
accomplished.  The  South  and  the  West  are 
now  in  a  large  degree  equipped  with  the 
machinery  of  civilization.  They  are  no 
longer  under  tribute  for  men  or  products, 
and  in  great  measure  are  also  becoming 
financially  free,  the  last  few  years  of  pros- 
perity having  discharged  vast  indebtedness. 
The  position  which  New  England  held  as  a 
manufacturing  source  to  supply  the  wants 
of  the  West  and  South,  has  in  turn  been  con- 
tested and  in  large  measure  lost.  The  great 
cities  of  the  West  and  South  have  changed 
their  distinctive  character  as  distributing 
points,  and  have  become  manufacturing  cen- 
tres in  turn.  The  remarkable  expansion  of 
the  cotton  industry  in  the  South,  the  rapid 
growth  of  leather  manufacture  in  the  West, 
taking  from  New  England  its  prominence 
in  both  fields,  are  but  two  illustrations 
among  many.  In  a  decade  the  cotton  mills 
of  the  South  increased  the  value  of  their 
output  from  $40,000,000  a  year  to  nearly 
$100,000,000;  while  in  the  same  time  the 
increase  in  the  output  of  the  cotton  factories 
of  New  England  has  been  but  little  over  5 
per  cent.  The  boot  and  shoe  industry  in 
284 


New  England  and  Foreign  Trade 

the  West  has  shown  even  greater  expansion. 
A  development  of  signal  significance  to  the 
future  prosperity  of  New  England  can  be 
found  in  the  rapid  expansion  all  through  the 
West  of  the  manufacture  of  all  sorts  of 
highly-finished  goods.  Communities  that 
have  heretofore  been  confined  to  the  pro- 
duction of  food-stuffs  and  raw  or  roughly 
finished  materials,  have  come  into  sharpest 
competition  now  with  some  of  your  longest- 
established  industries.  The  lines  in  which 
the  manufacturers  in  the  East,  and  particu- 
larly New  England,  had  until  recently  a  con- 
trol approaching  to  monopoly,  are  now  being 
diffused  over  the  very  territory  which  these 
factories  of  yours  once  almost  exclusively 
supplied. 

The  industrial  future  of  the  United  States 
certainly  lies  in  the  complete  development  of 
the  resources  of  every  state,  not  merely  in 
agriculture,  mining,  and  lumber,  but  in  man- 
ufacturing as  well.  And  so,  when  we  look  at 
it  properly,  we  can  but  approve  of  this  de- 
velopment, which  will  realize  dreams  of  in- 
dustrial independence  to  many  communities. 

New  England  is  deeply  concerned  in  this 
change.  It  is  impossible  to  conceive  that  her 
industries  are  to  be  permitted  to  decline,  and 
still,  if  there  is  to  be  such  radical  modifica- 
tion of  commercial  and  industrial  lines,  does 
it  not  inevitably  point  to  the  necessity  for 
285 


Business  and  Education 

New  England  looking  toward  new  fields? 
I  do  not  for  a  moment  believe  that  any  ten- 
dency of  our  industrial  development  as  a 
nation  is  going  to  result  in  industrial  de- 
cadence in  New  England.  Industrial  civil- 
izations which  are  rooted  deep  in  the  solid 
rock  of  established  prestige,  and  which  are 
fortified  by  a  century's  accumulation  of  tech- 
nical and  financial  equipment,  are  not  sud- 
denly torn  up  and  transplanted  to  new  local- 
ities, even  though  those  localities  may  be 
found  more  favorable  for  economical  pro- 
duction. It  is  not  with  any  sudden  wrench 
that  industrial  supremacy  passes  from  a 
state.  There  may  be  a  gradual  decrease  in 
the  number  of  new  enterprises,  a  settling  of 
the  population  into  a  stationary  condition,  a 
slower  development  of  new  railroad  facil- 
ities, a  relative  decline  in  wages,  a  level  con- 
dition of  bank  deposits.  Evidences  such  as 
those  may  be  read  as  indicative  of  most  im- 
portant new  influences.  If  they  are  read  in 
connection  with  the  statistics  of  heretofore 
undreamed-of  expansion  in  other  localities, 
they  may  be  taken  as  quite  serious  enough 
to  command  the  best  thoughts  of  such  groups 
of  men  as  compose  this  Commercial  Club, 
but  they  do  not  necessarily  foreshadow  de- 
cadence unless  you  who  make  up  this  com- 
mercial life  sit  idly  by. 

They  must,  it  seems  to  me,  arouse  new 
286 


New  England  and  Foreign  Trade 

initiative,  demand  greater  energy  and  keener 
thought,  an  intelHgent  questioning  as  to 
what  directions  the  new  development  shall 
take  if  the  old  lines  have  encountered  insur- 
mountable obstacles. 

New  England's  bank  capital  is  not  in- 
creasing. Her  bank  deposits  are  taking  slow 
steps  forward,  compared  with  the  gigantic 
strides  which  the  country  elsewhere  has 
shown.  Your  stock  exchange  shows  no 
great  evidence  of  new  corporate  development 
within  New  England  itself.  New  England 
capital  is  far  more  active  in  Southern  cotton 
mills  than  it  is  at  home.  Other  states, 
whose  railway  development  was  long  since 
apparently  complete,  are  spending  hundreds 
of  millions  upon  improvements  and  better- 
ments, but  New  England  railroad  compan- 
ies are  doing  comparatively  little.  Railway 
traffic  here  has  increased  less  rapidly  than 
in  any  other  part  of  the  country,  and,  finally, 
one  of  the  most  significant  tests,  the  skilled 
American  labor  which  has  built  up  the  man- 
ufacturing supremacy  of  New  England  is 
not  maintaining  its  proportion  to  the  popu- 
lation. The  increase  in  the  population  of 
New  England  is  largely  an  increase  of  the 
foreign-born. 

Such  general  indications  as  these  may 
have  less  significance  than  appears  to  me. 
You  can  judge  of  them  and  know  better 
287 


Busmess  and  Education 

what  modifying  influences  and  conditions 
should  be  taken  into  consideration,  but  it 
certainly  is  not  an  answer  to  say  that  New 
England  has  reached  a  stationary  condition, 
has  touched  the  limit  of  her  commercial  pos- 
sibilities, and  that,  while  other  localities  are 
uncovering  new  resources  and  making  vast 
development.  New  England  industries  should 
be  expected  only  to  pursue  the  even  tenor  of 
their  way,  content  to  maintain  the  position 
which  they  have  achieved,  but  bound  within 
limitations  of  natural  resources  and  condi- 
tions which  cannot  be  broken  through.  That 
attitude  of  mind  would,  perhaps,  be  comfort- 
able, but  I  do  not  believe  it  is  tenable. 

It  is  trite  to  say  that  neither  state  nor  in- 
dividual may  stand  still  —  that  they  must 
either  go  forward  or  backward.  Trite  as  it 
is,  however,  it  is  particularly  true  in  the 
fields  of  commerce  and  industry.  When  a 
locality  no  longer  holds  out  attractive  re- 
wards to  skilled  industry,  when  there  is  no 
longer  room  for  the  new-comer,  when  a 
stationary  condition  has  been  reached,  ex- 
perience has  abundantly  proved  that  such  a 
locality  is  in  danger  of  decadence.  The  ac- 
tive emigrate,  surplus  capital  is  invested  in 
other  fields,  the  competitive  advantages 
which  long  years  of  struggle  have  attained 
are  not  preserved,  —  a  community  which 
has  reached  such  a  condition  and  rests  con- 
288 


New  England  and  Foreign  Trade 

tent  with  what  it  has  obtained,  is  ultimately 
in  grave  danger  of  being  hurt  by  the  com- 
petition of  its  more  vigorous  rivals. 

Do  not  understand  me  as  saying  that  New 
England  stands  in  that  position.  I  would 
not  go  further  than  to  suggest  that  some 
broad  indications  point  to  a  possible  ap- 
proach to  it,  that  market  conditions  have 
undergone  radical  changes,  more  radical, 
perhaps,  in  their  significance,  than  some  of 
you  who  are  close  to  local  conditions  here 
have  fully  realized.  Conditions  which  have 
made  the  great  industrial  growth  of  New 
England  possible  are  changing.  Some  of 
your  advantages,  I  believe,  are  passing  away. 
The  markets  upon  whose  contributions  New 
England  has  thriven  are  declaring  inde- 
pendence, and  every  one  of  these  indications, 
it  seems  to  me,  points  to  the  necessity  for 
some  new  outlet  for  your  manufactured 
products. 

Such  outlet  is  to  be  found  in  foreign  mar- 
kets. It  seems  to  me  that  New  England  is 
so  situated,  geographically  and  industrially, 
and  is  so  equipped  in  the  temperament,  abil- 
ity, and  energy  of  its  people,  that  it  is  the 
most  natural  thing  to  expect  —  indeed,  it 
is  the  perfectly  logical  sequence  of  historical 
development  —  that  the  head  and  centre  of 
a  great  foreign  trade  development  should  be 
found  here.  I  am  firmly  convinced  that  we 
19  289 


Business  and  Education 

have  as  a  nation  the  elements  which  would 
enable  us  to  establish  ourselves  in  high  posi- 
tion in  the  markets  of  the  world.  We  have 
the  raw  material,  and  we  have  an  unequalled 
genius  for  mechanical  labor,  and,  of  impor- 
tance almost  as  great  as  these,  we  appreciate 
the  value  of  organization,  of  combination,  of 
doing  things  broadly  and  in  great  volume. 

While  our  foreign  trade  record  of  two  or 
three  years  ago,  and,  indeed,  the  record  of 
to-day,  is  one  of  which  we  may  well  be 
proud,  I  believe  that  it  marks  only  the  first 
beginnings  of  what  we  may  have  in  the  way 
of  foreign  trade  if  we  will  seriously  devote 
some  of  our  best  energies  to  it,  if  we  will  put 
into  the  work  of  establishing  ourselves  in 
the  foreign  markets  some  of  the  same  en- 
ergy, intelligence,  and  genius  which  we  have 
put  into  the  development  of  our  internal 
industrial  affairs. 

This  foreign  trade  of  ours,  vast  as  it  is, 
has  been  an  almost  haphazard  growth. 
Sometimes,  when  business  was  slack,  or  the 
desire  for  a  European  vacation  strong,  a 
manufacturer  would  take  a  glance  at  the 
European  field,  with  a  result  possibly  of 
some  good  beginnings  in  the  way  of  trade. 
Too  frequently,  however,  these  good  begin- 
nings have  not  been  followed  up.  If  orders 
arrived  when  business  had  turned  active 
again,  they  were  ignored.  We  have  lacked 
290 


New  England  and  Foreign  Trade 

system,  we  have  lacked  persistence,  we  have 
lacked,  in  this  field,  numberless  qualities 
which  we  really  have  in  abundance,  and 
which,  if  applied  to  foreign  markets  would 
bring  forth  splendid  results. 

Almost  universally  we  recognize  the  ne- 
cessity for  association  and  organization.  It 
is  a  part  of  our  political  creed.  It  has  in  the 
last  few  years  become  the  cardinal  principle 
of  our  commercial  life,  and  here  in  the 
United  States,  more  than  anywhere  else  in 
the  world,  is  seen  the  very  highest  develop- 
ment of  commercial  co-operation,  co-ordi- 
nation, organization,  combination.  Seeing 
that  as  clearly  as  we  do,  having  before  us  at 
the  moment  the  most  remarkable  illustra- 
tions of  the  effect  on  commercial  life  of  or- 
ganized and  consolidated  effort,  it  seems 
strange  that  we  have  as  yet  so  dimly  recog- 
nized the  prime  necessity  of  the  application 
of  these  same  principles  of  combination  and 
organization  to  the  building  up  of  a  foreign 
trade.  I  believe  that  a  recognition  of  that 
and  a  crystallization  of  that  recognition  into 
a  great,  well-organized  movement  embrac- 
ing the  widest  interests,  having  the  most 
intelligent  direction,  and  controlling  the  nec- 
essary credit  and  capital,  would  enable  this 
country  to  make  a  great  impression  upon 
the  foreign  markets  with  its  manufactured 
products. 

291 


Business  and  Education 

These  are  general  observations.  Suppose 
I  try  to  make  the  illustration  a  little  more 
specific,  but  in  doing  that  I  beg  you  to  re- 
member that  I  am  but  an  observer  of  the 
practical  workings  of  foreign  trade,  and  that 
I  merely  have  gathered  from  a  rather  wide 
opportunity  for  observation  what  seem  to 
me  a  few  well-grounded  principles. 
\  If  I  were  to  try  to  put  in  a  few  words  some 
of  the  main  difficulties  which  seem  to  me  to 
hamper  the  development  of  our  foreign 
trade,  I  would  say  that  they  chiefly  consist 
of  a  lack  of  continuous  intelligent  representa- 
tion in  the  foreign  markets,  the  absence  of 
proper  facilities  for  the  exhibition  of  sam- 
ples, and  bringing  to  the  attention  of  buyers 
the  variety,  quality,  and  grade  of  goods 
which  we  have  to  offer,  the  stubbornness  of 
our  manufacturers  in  meeting  the  specific 
peculiarities  and  requirements  of  localities, 
our  disinclination  to  vary  from  those  stand- 
ards which  have,  in  their  time,  enabled  our 
manufacturers  completely  to  outdistance  all 
the  rest  of  the  world  in  many  directions; 
the  failure  of  our  manufacturers  to  quote 
prices  for  products  laid  down  in  the  buyer's 
market,  so  that  the  difficulties  and  uncer- 
tainties of  calculations  of  foreign  money 
values,  of  exchange  rates,  of  shipment 
charges,  are  eliminated;  and  finally,  and  of 
almost  as  much  importance  as  all  else,  the 
292 


New  England  and  Foreign  Trade 

indifference  of  our  manufacturers  toward 
taking  any  steps  looking  to  a  proper  consid- 
eration of  credits  of  foreign  buyers,  an  al- 
most rigid  attitude  of  demanding  payment 
when  the  goods  go  on  shipboard. 

If  I  am  right  in  discerning  these  as  some 
of  the  chief  obstacles  in  the  way  of  a  more 
rapid  extension  of  our  position  in  the  foreign 
markets,  then  I  believe  a  plan  which  might 
operate  to  remove  these  obstacles  is  such 
a  combination  of  interests  of  our  exporters 
as  will  make  it  possible  for  the  exporting 
interests  of  the  United  States  to  be  con- 
tinuously and  intelligently  represented  in 
the  foreign  markets.  Just  for  the  pur- 
pose of  putting  a  thought  in  your  minds, 
crude,  perhaps,  in  its  first  formulation, 
but  having  in  it,  I  believe,  elements  which 
would  make  for  a  tremendous  development 
in  our  export  trade,  let  us  suppose  that 
we  had  an  organization  of  great  financial 
strength,  having  in  it  the  right  elements 
of  our  own  commercial  and  manufacturing 
life,  and  projected  for  the  purpose  of  en- 
ergetically and  intelligently  representing 
broadly  our  exporting  interests  in  the 
world's  markets.  Suppose  such  an  organ- 
ization should  establish  exhibition  rooms 
in  various  centres  of  trade  throughout  the 
world,  having  there  expert  salesmen  and 
engineers  equipped  for  the  work  of  repre- 
293 


Business  and  Ediication 

senting  these  products,  —  men  equipped  with 
technical  training,  with  knowledge  of  the 
language,  and  with  good  understanding  of 
both  domestic  and  foreign  conditions.  Sup- 
pose such  an  organization  should  stand  be- 
tween purchaser  and  producer,  guaranteeing 
on  the  one  hand  the  delivery  of  goods  ab- 
solutely according  to  sample,  on  the  other 
hand  guaranteeing  the  credit  of  the  pur- 
chaser. If  such  an  organization  were 
equipped  with  men  of  trained  intelligence, 
keen  observers  of  commercial  conditions, 
who  would  be  quick  to  see  an  opportunity 
and  to  devise  means  of  grasping  it,  and  if 
that  organization  had  behind  it  the  co-opera- 
tion of  great  manufacturing  interests  here, 
I  believe  wonders  could  be  accomplished^ 

While  Europe  has  the  greatest  respect  for 
our  industrial  capabilities,  there  is  not  an 
old-world  manufacturer  who  does  not  look 
upon  many  of  our  crude  methods  and  hap- 
hazard intermittent  efforts  in  the  field  of 
international  trade  as  his  refuge  of  safety 
from  a  competition  which  could  not  other- 
wise be  repelled.  Systematic  organization 
and  training  of  men  for  work  which  you  in 
New  England  once  knew  how  to  do  well, 
but  which  the  rest  of  the  country  has  never 
known  much  about,  a  permanence  of  effort 
and  greater  flexibility  in  our  manufacturing 
standards,  those  are  the  things  that  are 
294 


New  England  and  Foreign  Trade 

needed  to  press  our  foreign  trade  into  the 
position  it  should  rightly  occupy. 

There  are  no  people  better  qualified  for 
such  a  struggle  than  the  commercial  classes 
of  New  England.  It  is  going  to  need  educa- 
tion, but  you  have  here  the  facilities,  better 
than  anywhere  else  in  the  country,  if  you 
will  but  bend  them  to  the  needs  of  this  situa- 
tion. Train  men  to  know  the  commercial 
world  and  to  know  the  commercial  methods 
of  other  people  than  our  own;  train  them 
in  language,  do  for  them  what  is  being  so 
well  done  by  the  commercial  schools  of 
Germany,  and  they  will  repay  the  effort. 

I  can  think  of  no  more  fruitful  field  of 
inquiry  for  this  Commercial  Club  than  that 
of  the  need  of  a  school  for  training  young 
men  for  international  commerce.  I  believe 
if  you  would  make  a  study  of  that  question 
and  would  come  to  realize  what  a  great 
impetus  could  be  given  our  foreign  trade  by 
a  school  which  would  turn  out  young  men 
thoroughly  equipped  to  enter  such  a  field  of 
activity,  you  would  find  yourselves  enthusi- 
astic advocates  of  some  radical  departures 
in  education,  and  if,  as  a  result  of  such  inves- 
tigation, you  should  graft  on  to  one  or  more 
of  your  great  institutions  of  learning  a 
course  intelligently  designed  for  this  pur- 
pose, you  would  not  only  be  offering  golden 
opportunities  to  your  young  men,  but  you 

295 


Business  and  Education 

would  be  placing  the  whole  commercial 
country  under  another  debt  of  obligation  to 
you,  because  you  would  again  be  ready  to 
send  out  into  a  new  field  New  England  men, 
with  New  England  characters,  equipped  for 
their  task  with  New  England  thoroughness. 


296 


POLITICAL  PROBLEMS  OF  EUROPE 

AS  THEY  INTEREST 

AMERICANS 

I.    The  Awakening  of  Interest  in 
European  Affairs 

Our  interest  in  European  affairs  has  been 
undergoing  marked  change  in  the  last  gen- 
eration —  even  in  the  last  half  dozen  years. 
We  do  not  need  to  look  back  far  to  remem- 
ber the  time  when  we  had  little  concern  in 
world  politics.  Questions  of  European  pub- 
lic policy,  the  tendencies  of  political  currents, 
and  the  objects  of  national  ambitions,  were 
without  practical  interest  to  the  average 
American.  Even  European  war  meant  in 
our  minds  only  that  we  were  to  sell  more 
wheat  and  provisions,  and  we  looked  with 
greater  interest  at  market  quotations  than 
we  did  at  the  questions  which  might  involve 
nations  in  conflict.  We  were  not  only  out- 
side the  range  of  the  game  of  European 
diplomacy,  but  we  lacked  reason  for  having 
a  keen,  practical  interest  in  European  social 
and  industrial  conditions. 

We  were  concerned  with  Europe's  general 
prosperity,  for  Europe  bought  our  produce; 
297 


Business  and  Education 

but  the  training,  efficiency,  and  organization 
of  European  labor,  the  effect  upon  industrial 
progress  of  current  legislation  and  of  socio- 
logical tendencies,  all  had  more  of  an  aca- 
demic than  a  practical  interest  for  us.  Im- 
portant as  was  our  foreign  trade,  four-fifths 
of  our  exports  were  the  direct  products  of 
the  farms,  ranches,  and  forests.  Our  fields 
could  fear  no  rivalry,  and  our  workshops 
had  not  begun  to  challenge  competition. 

With  the  military  and  industrial  successes 
of  the  last  half  dozen  years,  however,  have 
come  many  and  far-reaching  changes.  Not 
only  is  our  present  interest  in  world  politics, 
in  its  relation  both  to  our  own  political  sys- 
tem and  to  our  national  ambitions,  a  matter 
of  recent  growth,  but  we  have  another  quite 
immediate  interest  in  the  political  conditions 
and  development  of  other  nations  —  an  in- 
terest that  leads  us  to  measure  the  effect 
of  national  conditions  and  development  on 
the  efficiency  of  industrial  and  commercial 
competitors. 

Now  that  we  have  taken  our  place  in  the 
first  rank  as  a  manufacturing  nation  and  can 
see  an  inevitable  destiny  leading  us  toward 
world-industrial  competition,  all  the  ques- 
tions affecting  the  relative  efficiency  of  the 
other  great  industrial  countries  in  competi- 
tion with  us  in  the  world  markets  become 
of  practical  importance  to  every  American. 
298 


Political  Problems  of  Europe 

The  farm  boy,  the  shop  apprentice,  the  clerk, 
the  worker  in  every  field  of  American  life, 
must  henceforth  have  a  more  and  more  inti- 
mate personal  relation  to  European  condi- 
tions, problems,  and  tendencies.  That  is  true 
because  the  conditions  that  are  affecting  our 
great  industrial  competitors,  the  problems 
with  which  they  are  concerned,  the  difficul- 
ties which  they  are  encountering,  the  suc- 
cesses which  give  them  fresh  courage,  will 
all  have  an  increasing  influence  upon  the  net 
results  of  the  day's  work  of  the  average 
American. 

For  these  reasons  I  believe  that  we  are 
ready  to  give  a  more  intelligent  study  to 
European  conditions,  and  that  it  will  be 
practically  worth  our  while  to  gain  a  clearer 
comprehension  of  the  political  life  of  other 
nations,  and  of  their  social  and  industrial 
problems,  and  the  efforts  directed  toward 
their  solution.  I  believe  that  we  are  com- 
ing to  recognize  that  we  need  something 
more  than  the  bare  facts  regarding  impor- 
tant events.  We  need  to  comprehend  under- 
lying causes.  We  need  to  understand  more 
of  the  perspective  and  the  significance  of 
foreign  events  in  their  relation  to  our  own 
affairs.  It  is  important,  too,  that  we  not 
only  keep  abreast  of  those  events  which  con- 
stitute live  news  in  the  mind  of  the  cable 
editor,  but  that  we  should  understand  those 
299 


Bus'mess  and  Education 

social  and  industrial  conditions,  those  cur- 
rents of  public  thought,  those  national  and 
racial  attitudes  which  have  now  all  come 
to  form  subjects  of  distinct  practical  interest 
to  us,  because  they  are  matters  directly  re- 
lated to  our  pocket-books,  matters  with 
which  our  material  prosperity  must  hence- 
forth have  definite  concern. 

I  am  profoundly  impressed  with  the  im- 
portance of  the  awakening  interest  in  Euro- 
pean affairs  and  of  the  value  of  the  clear 
observation  of  these  affairs  through  the  eyes 
of  practical  American  business  men.  The 
more  rapidly  we  lose  some  of  our  com- 
placence and  come  to  recognize  that  while 
there  are  many  things  that  we  do  better 
than  other  people,  there  are  many  other 
things  that  we  do  worse,  the  sounder  will 
be  our  understanding,  both  of  our  own  re- 
sources and  the  strength  of  our  competitors 
in  the  international  industrial  development. 

In  the  old  days,  when  a  man  had  passed 
through  his  apprenticeship  in  some  trade, 
his  ambition  impelled  him  to  travel  from 
one  centre  to  another  and  observe  the  art 
and  learn  the  methods  that  were  practised 
wherever  his  trade  had  gained  pre-eminence ; 
and  after  this  travel  and  observation  he  was 
proud  to  call  himself  a  "  journeyman  work- 
man." That  is  the  German  custom  to-day, 
and  there  we  find  not  only  journeymen 
300 


Political  Problems  of  Europe 

craftsmen,  but  journeymen  manufacturers, 
merchants,  and  bankers  —  men  who  are  ob- 
serving with  intelHgence  and  minute  care 
the  methods  and  practices  of  their  interna- 
tional competitors.  Just  such  observation  is 
healthful  for  us.  While  it  will  cause  the 
American  journeyman  to  lose  much  of  his 
Yankee  complacency,  it  will  in  the  end  give 
him  the  firmest  foundation  upon  which  to 
rest  his  national  pride  and  hopes  for  the 
national  future.  It  is  merely  as  a  "  journey- 
man "  business  man  that  I  should  try  to 
write  of  some  of  the  European  conditions 
which  have  come  under  my  observation,  and 
which  seem  to  me  of  practical  interest  to 
other  Americans. 

In  a  survey  of  Europe  which  seeks  to 
examine  the  qualities  of  nations  as  indus- 
trial competitors,  present  and  prospective, 
the  fundamental  consideration  must  be  the 
stability  of  governments.  Political  stability 
is  an  absolute  prerequisite  to  industrial  pros- 
perity. Where  the  energies  of  a  people  are 
constantly  diverted  to  the  settlement  of  polit- 
ical questions,  the  advance  of  commerce  and 
industry  is  greatly  hindered.  Stability  of 
conditions  is  the  foundation  on  which  great 
commerce  is  built.  A  period  of  stability  in 
our  own  political  conditions  is  always  recog- 
nized as  most  favorable  to  business  develop- 
ment. The  possibility  of  a  change  in  money 
301 


Business  and  Education 

standard  or  in  customs  tariff  unsettles  every 
branch  of  commerce.  The  poHtical  stabihty 
of  our  industrial  rivals  is  a  consideration  of 
the  most  practical  importance  to  every  one 
concerned  in  our  commercial  life,  and  in  any 
analysis  of  the  strength  of  our  competitors 
that  is  the  first  phase  of  the  subject  to 
investigate.  Is  industrial  development  in 
Europe  to  go  forward  under  about  the  same 
political  conditions  as  now  exist,  or  do  the 
growing  expenditures  and  increasing  debts, 
the  weight  of  military  organization  and  of 
naval  requirements,  the  growth  of  socialism 
and  the  unsettling  of  established  conditions, 
all  combine  to  endanger  the  European  polit- 
ical fabric  and  threaten  essential  modifica- 
tions of  government  which  will  affect  the 
whole  commercial  and  industrial  life?  Is 
the  map  of  Europe  drawn  in  indelible  colors  ? 
Will  the  development  of  commerce  and  in- 
dustry proceed  with  as  much  protection  and 
aid  from  the  government  and  with  no  more 
obstacles  and  disabilities  than  now?  Are 
the  dangers  of  wars  imminent?  Are  the 
economies  of  peace  secure?  Answers  to 
these  questions  must  all  have  immense  in- 
fluence on  the  future  of  our  industrial 
competitors. 

Since  the  impetus  which  the  Czar  gave 
to    the    arbitration   movement   through    the 
Hague    Conference    there    has    been    much 
302 


Political  Problems  of  Europe 

progress  —  progress  that  has  been  recently 
emphasized  by  the  conclusion  of  treaties 
between  England  and  France,  France  and 
Italy,  Sweden  and  Denmark,  and  which 
may  even  record  the  striking  achievement 
of  an  arbitration  treaty  between  France 
and  Germany.  These  treaties,  however, 
are  little  more  than  expressions  of  national 
good-will. 

It  is  in  France  that  the  arbitration  move- 
ment has  shown  the  greatest  vitality.  The 
well-directed  efforts  of  the  Baron  d'Estour- 
nelles  de  Constant  have  been  largely  re- 
sponsible for  this.  He  has,  within  a  few 
months,  built  up  a  group  of  more  than  one 
hundred  deputies  who,  while  still  affiliating 
with  various  other  groups  in  the  Chamber, 
form  a  tolerably  compact  organization  in 
favor  of  international  arbitration.  The  ex- 
penses of  militarism,  the  increasing  budgets, 
the  growing  difficulties  in  the  effort  to  make 
taxation  equal  government  requirements,  the 
constant  and  enormous  additions  to  the  per- 
manent national  debts,  all  spell  ruin  for  the 
great  powers  of  Europe  in  the  mind  of  the 
Baron  de  Constant.  He  is  most  pessimistic 
in  regard  to  the  financial  future  of  the 
nations  of  Europe  if  military  expenditures 
are  to  keep  up  to  their  present  scale. 

The  Baron  de  Constant  impressed  me  as 
a    man    of    tremendous    earnestness.      The 

303 


Business  and  Education 

strength  of  his  behef  in  his  own  pessimistic 
picture  of  the  future  of  Europe,  unless  the 
tendency  toward  increasing  armament  and 
ever-growing  expenditures  is  checked,  un- 
doubtedly has  given  him  great  influence, 
not  only  in  the  French  Chamber,  but  with 
the  political  leaders  of  other  nations  as  well. 
When  he  talked  to  me  of  the  financial  ruin 
which  he  saw  ahead,  and  of  the  certainty 
of  war  which  must  result  by  the  time  the 
growing  strain  of  militarism  reached  the 
inevitable  breaking  point,  he  impressed  me, 
not  alone  with  his  earnestness,  but  with  the 
force  of  his  reasoning  and  the  gravity  of 
the  peril  which  he  sees.  It  is  not  surpris- 
ing, in  view  of  the  budget  and  balance  sheet 
of  France,  that  a  Frenchman  sees  this  peril 
with  special  distinctness.  The  success  which 
the  Baron  de  Constant  has  met  with  in 
bringing  together  a  working  group  in  the 
French  Chamber  and  in  successfully  com- 
pleting a  treaty  with  England  is  great 
enough  to  entitle  him  to  high  credit  as  a 
statesman.  For  many  years  there  has  been 
in  France  a  most  intense  national  prejudice 
against  England  —  prejudice  that  has  fre- 
quently descended  to  scurrilous  abuse,  and 
it  is  certainly  remarkable  to  find  so  marked 
a  reversal  of  public  sentiment  in  the  few 
months  which  have  intervened  between  not- 
able exhibitions  of  that  prejudice  and  the 

304 


Political  Problems  of  Europe 

recent  acclaim  over  the  completion  of  an 
arbitration  treaty  and  the  establishment  of 
a  cordial  international  feeling. 

While  great  credit  is  due  to  the  Baron  de 
Constant  for  his  efforts  in  giving  practical 
form  to  this  change  in  national  feeling,  the 
really  potent  influence  was  that  of  King 
Edward  himself.  When  he  planned  a  royal 
visit  to  the  French  capital,  it  was  in  the 
face  of  abusive  criticism  of  England  over 
the  Boer  War.  His  courtesy,  tact,  and 
good-humor  produced  a  remarkable  effect 
on  the  national  temper  of  France.  The  re- 
turn visit  of  President  Loubet  and  the  hearti- 
ness of  the  greeting  which  London  gave 
him  —  a  greeting  more  hearty,  it  was  said, 
than  he  had  ever  received  in  Paris  —  was 
all  that  seemed  needed  to  win  the  volatile 
French  affections,  and  suddenly  the  whole 
race  of  journalists  began  to  discover  rea- 
sons for  most  brotherly  cordiality  between 
Frenchmen  and  Englishmen.  All  this 
worked  in  happily  with  the  arbitration 
movement  in  the  Chamber.  There  fol- 
lowed a  visit  of  the  arbitration  group  to 
London  as  the  guests  of  Parliament,  and  a 
return  visit  of  Parliamentary  members  as 
the  guests  of  the  French  Chamber,  and  from 
this  interchange  of  courtesies  have  resulted 
real  understandings  and  sympathies  such  as 
have  been  markedly  lacking  before  in  the 

20  305 


Business  and  Education 

international  relations  between  those  two 
great  powers. 

The  effect  of  royal  visits,  the  great  diplo- 
matic significance  that  attaches  to  them, 
and  the  genuine  influence  which  they  have 
in  shaping  the  public  opinion  of  entire  na- 
tions, are  among  the  aspects  that  strike  an 
American  observer  as  peculiarly  interesting 
in  European  politics.  Within  the  last  few 
months  in  addition  to  the  interchange  of 
courtesies  between  the  King  of  England 
and  the  President  of  France,  there  have 
been  important  visits  by  the  Italian  king 
to  France  and  Germany,  one  of  which  had 
almost  as  marked  effect  in  producing  cordial 
national  feeling  between  two  nations  as  had 
King  Edward's  visit.  Another  royal  visit 
that  was  planned,  that  of  the  Czar  to  Rome, 
was  interfered  with  for  some  reason,  and 
European  journalists  wrote  endless  columns 
of  speculation  in  regard  to  the  reasons  for 
the  change  of  royal  plans. 

The  arbitration  movement  is  undoubtedly 
gaining  force;  and  still,  at  best,  it  is  but 
binding  warriors  with  threads.  No  one  for 
a  moment  believes  that  any  number  of  arbi- 
tration agreements  or  Hague  Tribunals 
would  hold  in  check  a  military  movement 
when  ruler  or  people  were  once  aroused. 
Without  doubt  such  agreements  may  do 
much  to  harmonize  international  prejudice 

306 


Political  Problems  of  Europe 

and  may  be  of  great  use  in  preventing  fric- 
tion over  small  differences  —  friction  which 
sometimes  grows  into  animosities  demand- 
ing national  bloodshed.  Their  usefulness  is 
acknowledged  by  most  of  the  statesmen  of 
Europe,  but  no  nation  shows  any  inclina- 
tion toward  abating  one  jot  of  its  military 
programme. 

Increasing  armament,  larger  armies,  more 
expensive  defences,  and  more  thorough  prep- 
aration is  the  order  of  the  day  everywhere 
in  Europe.  In  conversation  with  public  men 
and  with  many  commercial  and  industrial 
leaders,  I  have  never  heard  the  opinion  ven- 
tured that  the  leading  powers  of  Europe  are 
likely  in  the  near  future  to  disarm,  or,  in- 
deed, materially  to  reduce  their  military  ex- 
penditures. The  German  Socialists,  it  is 
true,  make  the  reduction  of  such  expendi- 
tures one  of  the  principal  planks  of  their 
platform,  but  in  the  same  speech  in  which 
Herr  Bebel  arraigns  the  Government  for 
excessive  military  expenditures,  he  castigates 
it  for  doing  nothing  to  check  the  aggressive 
policy  of  Russia.  There  is  plenty  of  grum- 
bling over  the  taxes  which  support  these  vast 
armaments  of  Europe,  but  there  is  no  deep- 
seated  conviction  in  the  minds  of  any  con- 
siderable portion  of  the  people  of  any  of  the 
great  powers  that  their  own  nation  should 
set  the  example  of  a  reduction  of  military 

307 


Business  and  Education 

and  naval  strength.  Few  things  in  Europe 
can  be  predicted  with  more  certainty  than 
that  the  outlay  for  defence  and  for  aggres- 
sive strength  will  continue. 

The  bankruptcy  of  Europe,  which  such 
men  as  the  Baron  de  Constant  see,  is  per- 
fectly easy  of  demonstration  by  any  ama- 
teur statistician,  who  needs  only  a  series  of 
budgets  and  a  short  lead-pencil  thoroughly 
to  demonstrate  such  a  conclusion;  but  so 
easily  reached  a  conclusion  might  be  wrong. 
I  believe  that  it  would  be.  It  is  true  that 
the  cost  of  the  military  establishment,  the 
vast  expenditures  in  constructing  navies, 
the  constantly  recurring  budget  deficits,  the 
terrible  weight  of  taxation,  are  all  real  and 
painfully  evident  facts.  France  is  the  nat- 
ural place  to  look  for  these  pessimistic 
opinions  in  regard  to  the  future  of  the  great 
powers,  for  France  has  a  debt  incompar- 
ably the  greatest  in  the  world,  and  a  debt 
that  seems  ever  growing.  To-day  it  stands 
roundly  at  $6,500,000,000,  a  debt  so  great 
that  every  voter  in  France  —  and  there  is 
universal  manhood  suffrage  there  —  every 
voter  in  France  has  a  share  of  responsibility 
for  the  national  debt  equal  to  $844.  It  is 
small  wonder  that  this  vast  debt  should  give 
rise  to  apprehension.  Only  the  unparalleled 
thrift  of  her  own  people  has  enabled  France 
to  market  the  tremendous  blocks  of  rentes 
308 


Political  Problems  of  Europe 

which  have  been  the  legacies  left  her  by  one 
finance  minister  after  another.  During  the 
years  of  peace  the  succession  of  budget 
deficits  have  made  almost  as  great  increases 
in  the  debt  of  France  as  had  formerly  been 
piled  up  by  the  misfortunes  of  war.  So  it 
is  easy  to  see  how  a  Frenchman,  with  mind 
imbued  with  the  great  military  expenditures 
and  growing  debt  of  his  own  country,  should 
look  out  over  Europe  and  note  the  cost  of 
the  great  armies  and  see  the  stream  of  taxes 
that  runs  into  the  sea  that  navies  may  float 
there  —  sees  everywhere  a  tendency  toward 
increasing  government  expenditures  and 
threatening  deficits  and  nowhere  means  of 
escape  through  taxation,  because  taxation  is 
already  perilously  high ;  it  is  no  wonder  that 
such  an  observer  sees  in  the  constant  in- 
crease of  government  obligations  an  ulti- 
mate financial  collapse  and  political  disin- 
tegration of  a  character  which  might  readily 
disturb  the  balance  of  power  in  a  way  no 
army  could  check  nor  treaty  stay. 

In  spite  of  all  that  there  is  to  sustain  such 
pessimistic  views,  I  am  certain  that  the  men 
most  powerful  in  shaping  the  affairs  of 
Europe  do  not  see,  at  least  in  anything  like 
the  immediate  future,  any  reason  to  believe 
that  in  Western  or  Central  Europe  there  are 
to  be  radical  political  upheavals,  sweeping 
social  changes,  or  the  financial  break-down 

309 


Business  and  Education 

of  governments.  The  exception  is  the  near 
East,  the  Balkan  firebrand,  where  there  are 
irreconcilable  differences  and  implacable 
racial  antagonisms,  seething  under  impos- 
sibly bad  government,  and  where,  sooner  or 
later  —  where,  indeed,  both  sooner  and  later, 
for  no  single  war  can  settle  those  vexed 
questions  —  there  may  be  seen  the  fall  of 
old  governments  and  the  upbuilding  of  new, 
the  end  of  dynasties,  and  the  creation  of 
new  national  combinations.  In  the  near 
East  there  is  always  imminent  a  catastrophe 
which  might  involve  all  Europe  in  conflict. 
I  am  by  no  means  rash  enough  to  venture 
opinions  of  my  own  in  regard  to  the  polit- 
ical future  of  Europe.  The  question  is  too 
complicated,  the  undercurrents  too  many 
and  too  important,  for  the  casual  observer 
to  reach  more  than  a  superficial  conclusion. 
I  have  been  fortunate,  however,  in  meeting 
men  of  great  importance  in  both  the  busi- 
ness life  and  Government  councils  of  most 
of  the  capitals,  and  the  impression  which  I 
have  of  Europe's  political  future  is  the  com- 
posite of  interviews  with  men  whose  opin- 
ions are  worth  attention.  The  impression 
which  these  conversations  has  left  is  one 
of  political  stability,  one  which  leads  to  a 
strong  belief  in  the  unlikelihood  of  immedi- 
ate radical  changes.  There  may  be  social- 
istic triumphs,  there  may  be  growing  parties 
310 


Political  Problems  of  Europe 

with  programmes  of  revolt  against  the  ex- 
isting form  of  government,  there  may  be 
burdensome  taxation  and  great  military  ex- 
penditures; and  still,  if  one  takes  up  one 
nation  after  another  and  analyzes  its  posi- 
tion in  relation  to  the  whole  fabric  of  Euro- 
pean politics,  the  practical  man  will,  I  be- 
lieve, conclude  that  Europe  is  likely  to  go 
on  for  a  great  many  years  very  much  as 
it  has  been  going  on  for  a  good  many  years 
past. 

Take  the  situation  in  revolutionary 
France,  the  country  that  has  had  more  ex- 
perience in  constitution  making  than  all 
others  in  Europe.  France  is  to-day  really 
one  of  the  most  stable  of  European  gov- 
ernments. There  is  small  likelihood  of 
France  becoming  involved  in  any  war,  and 
the  reason  for  that  does  not  lie  in  this  great 
wave  of  popular  approval  of  arbitration 
which  is  just  now  such  a  manifest  feature 
of  French  politics,  but  lies  much  deeper. 
France  has  no  serious  ambitions  for  an  in- 
crease of  European  territory.  Alsace-Lor- 
raine is  a  poignant  regret,  but  not  a  military 
ambition.  Perhaps  the  one  dominant  char- 
acteristic of  the  French  nation  as  a  whole 
is  its  penurious  thrift;  and  every  holder 
of  F.  lOO  rentes  is  an  advocate  of  peace 
because  the  economy  of  peace  appeals  to  his 
pockets. 

3" 


Business  and  Education 

But  the  real  reason  why  France  may  to- 
day be  set  down  as  among  the  most  pacific 
of  nations  Hes  in  this  fact:  France  is  not 
so  much  a  repubhc,  not  so  much  a  govern- 
ment administered  by  the  voice  of  the  peo- 
ple, as  it  is  an  oligarchy.  The  Government 
of  France  is  really  a  government  by  a  polit- 
ical dynasty,  by  a  group  of  men  and  their 
political  heirs,  who  have  made  a  business 
of  governing  France,  and,  having  left  to 
them  the  centralized  instrument  of  the  Na- 
poleonic system,  have  governed  France,  not 
particularly  as  a  majority  vote  of  the  nation 
might  have  dictated,  but  as  they  have  best 
seen  fit  —  with  some  patriotism  for  France, 
and  with  much  regard  for  their  own  place, 
power,  and  perquisites.  This  political  dy- 
nasty has  no  disposition  to  risk  anything  on 
war,  for  war  would  mean  one  of  two  things. 
If  it  ended  in  defeat,  it  would  mean  that 
the  French  nation  would  rise  up,  as  it  al- 
ways has  risen  when  its  sensibilities  were 
really  smitten,  and  the  whole  dynasty  would 
be  irrevocably  tumbled  out  of  office,  to  say 
nothing  of  the  prospect  of  upsetting  the 
form  of  government  itself.  But  a  military 
victory  to  France  would  have  in  it  quite  as 
distressing  possibilities  for  her  political  dy- 
nasty as  would  a  military  defeat;  for  a 
military  victory  would  mean  a  military  hero, 
and  France  can  never  be  trusted  not  to  lose 
312 


UNWtH 

■S^Vl^  ^:}Afatical  Problems  of  Europe 

her  heart  to  a  military  hero.  So  sharply  is 
this  always  in  the  mind  of  the  Government 
that  when  the  nations  had  a  bit  of  police 
work  to  do  at  Pekin,  and  under  hardly  any 
conceivable  development  could  thereby  gar- 
ner many  military  laurels,  the  man  who,  by 
every  right  of  precedence,  position,  and 
ability,  should  have  gone  into  the  Far  East 
at  the  head  of  the  French  troops  was  kept 
at  home,  and  a  man  was  selected  with  abil- 
ities of  a  type  that  left  no  fear  in  the  mind 
of  the  Government  about  his  ever  becoming 
a  military  idol. 

France  may  give  us  occasional  exhibitions 
of  political  turmoil.  It  is  not  improbable 
that  the  socialistic  sentiment  in  France  will 
continue  to  grow,  and  that  there  will  be  some 
evolutionary  changes  in  government;  but  I 
believe  that  the  solidity  of  the  republic  may 
be  set  down  as  one  of  the  practical  certainties 
of  European  politics,  and  that  so  far  as  the 
future  of  France,  as  a  world-industrial  com- 
petitor is  concerned,  we  may  count  upon  her 
industries  being  developed  without  serious 
interference  from  any  political  change. 

If  we  turn  to  Germany  we  find  there  on 
the  face  of  things  much  that  might  indicate 
impending  radical  political  change.  There 
is  certainly  political  progress  there  —  prog- 
ress toward  individual  liberty  and  political 
equality,  progress  toward  really  representa- 

313 


Business  and  Education 

tive  government.  If  one  were  to  try  to  put 
into  a  single  phrase  the  significance  of  the 
poHtical  currents  and  tendencies,  the  real 
essence  of  the  vital  political  life  of  Germany, 
it  could  well  be  said  that  it  is  to  write 
"  truth  "  into  the  constitution.  Germany's 
constitution  contains  many  fair-sounding 
provisions  for  liberty  and  equality,  but  it  has 
not,  in  fact,  furnished  either  liberty  or  equal- 
ity to  the  humble  German  citizen.  The  con- 
stitution says  that  every  man  shall  have 
equal  justice,  that  every  man  shall  be  eli- 
gible to  public  office,  and  that  there  shall  be 
fairness  of  franchise  and  of  voting  repre- 
sentation. In  the  practical  operation  of  gov- 
ernment none  of  those  guarantees  is  fully 
kept. 

The  political  life  of  Germany  probably 
has  a  more  direct  practical  interest  for  the 
American  citizen  than  does  that  of  any  other 
Continental  nation,  for  many  of  their  polit- 
ical questions  and  their  legislative  problems 
directly  concern  us.  That  is  true  because 
of  the  barriers  they  are  putting  up  against 
our  exports  of  food  products,  and  because 
of  the  work  which  the  Government  is  doing 
in  education  and  in  legislation  affecting 
social  conditions  —  legislation  that  has  most 
pronounced  effect  upon  the  efficiency  of 
industrial  competition. 

There   is   an   "  irrepressible  conflict "   in 

3M 


Political  Problems  of  Europe 

the  development  of  German  national  life. 
Germany  is  endeavoring  at  the  same  mo- 
ment to  be  a  great  agricultural  nation  and 
a  great  industrial  nation.  Agriculture  must 
wrest  whatever  it  may  of  success  from  a 
stubborn,  parsimonious  soil;  industry  finds 
itself  in  a  country  barren  of  natural  resources 
and  lacking  cheap  raw  material. 

It  is  only  within  a  generation  that  Ger- 
many's industrial  ambitions  have  become 
internationally  important;  but  within  that 
generation  almost  all  of  the  vital  currents 
of  German  development  have  been  flowing 
in  the  direction  of  industrialism.  Industry 
has  gained  on  agriculture,  until  to-day  the 
national  economic  life  is  about  equally  di- 
vided between  the  two.  The  great  progress 
of  industry  has  seemed  to  the  agricultural 
half  of  the  nation  to  work  great  hardship  to 
it,  while  the  present  hopes  and  ambitions  of 
the  industrial  half  seem  to  the  agrarians 
only  to  be  the  planning  for  them  of  still 
greater  hardships. 

The  landlord  sees  in  manufacturing  and 
commerce  an  unfair  competitor  for  labor. 
The  factory  entices  the  laborer  from  his 
fields.  Railroads  and  steamships,  the  land- 
lord thinks,  are  a  malicious  innovation,  be- 
cause they  bring  the  fields  of  Argentina  and 
America  into  sharp  competition  with  his 
own  sterile  acres.     His  only  hope  has  been 

315 


Business  and  Education 

in  keeping  out  of  Germany  the  products  of 
other  agricultural  countries  and  by  gaining 
from  the  Government  higher  and  higher 
protection  for  his  own  products. 

The  landlord's  antagonisms  and  com- 
plaints are  by  no  means  without  foundation. 
He  has  certainly  fallen  on  evil  days.  The 
march  of  events  has  made  more  and  more 
difficult  his  financial  position.  While  he  has 
succeeded  in  laying  enormous  taxes  on  the 
foodstuffs  of  the  German  workingman,  he 
has  not  freed  himself  from  the  difficulties  of 
almost  impossible  competition.  Every  com- 
parison which  he  makes  with  his  former 
position  and  influence  adds  to  his  bitterness 
against  the  new  industrial  regime. 

On  the  one  side  he  finds  himself  pressed 
by  what  he  regards  as  upstart  socialistic 
doctrines  and  insistent  demands  for  broader 
political  rights,  and  even  worse  than  that, 
the  ever-reiterated  demand  for  what  seems 
to  him  ruinously  cheap  food.  On  the  other 
hand,  his  long-established  influence  in  af- 
fairs is  assailed  by  a  new  aristocracy  of 
wealth.  When  one  remembers  the  historical 
position  of  the  landed  class,  the  landlord's 
view  is  not  unnatural.  All  through  German 
history  the  junkers  have  officered  the  army 
and  led  it  to  its  fields  of  victory ;  they  have 
supplied  the  statesmen  and  furnished  the 
class  that  has  ruled  the  country.  It  is  small 
316 


Political  Problems  of  Europe 

wonder  that  they  feel  bitter  antagonism 
toward  this  industrial  development.  This 
new  industry  has  successfully  competed  with 
the  meagre  wage  the  landowner  was  able 
to  offer  to  the  farm  hand.  Bleak  cottages 
are  left  empty,  and  fields  are  robbed  of  labor. 
The  landlord's  late  servants,  over  whom  he 
ruled  almost  as  ruled  his  feudal  ancestors, 
have  not  only  left  his  acres,  but  in  the  cities 
they  have  organized  themselves  into  a  polit- 
ical power  and  shout  "  bread  usurer "  at 
him,  and  in  their  determined  demands  for 
cheap  food,  keep  up  a  constant  warfare  upon 
that  protective  tariff  that  is  the  only  barrier 
the  junker  has  left  between  his  land  and 
financial  ruin. 

All  that  is  bad  enough;  but  when  this 
same  industrialism  which  has  touched  the 
aristocrat  in  his  purse  wounds  him  also  in 
his  pride,  when  it  builds  up  a  new  aristoc- 
racy, a  new  ruling  class  with  strength  and 
position  measured  by  wealth,  and  begins  suc- 
cessfully to  assail  the  junker's  immemorial 
influence  in  national  affairs,  the  bitterness 
of  his  position,  with  his  traditions  of  for- 
tune and  power  thus  being  undermined,  is 
not  hard  to  understand. 

So  Germany  has,  in  the  irreconcilable  dif- 
ferences between  agriculture  and  industry, 
an  **  irrepressible  conflict " :  On  the  one 
hand  a  landed  aristocracy,  long  used  to  polit- 

317 


Business  and  Education 

ical  power  —  a  power  whose  roots  run  back 
to  feudal  tradition,  but  whose  very  daily  life 
is  now  hampered  and  made  difficult  by 
depression  in  agriculture;  while  opposed  to 
this  aristocracy  of  birth  is  a  flauntingly 
prosperous  industrialism,  with  its  rebellion 
against  class,  its  demand  for  the  curtailment 
of  the  privileges  of  the  nobles,  its  appeal  for 
broader  political  rights,  and  more  secure 
individual  liberty.  The  struggle  which  will 
go  on  between  these  irreconcilable  elements 
of  the  German  nation  must  have  in  it  con- 
stant interest  for  us,  and  an  interest  that  is 
not  merely  academic,  for  the  progress  of  the 
conflict  will  have  intimate  relation  to  our 
position  in  international  trade. 

When  one  gets  even  slightly  below  the 
surface  in  a  study  of  political  conditions  in 
Germany,  he  cannot  fail  to  be  surprised  that 
so  little  has  been  accomplished  in  the  direc- 
tion of  political  equality  and  freedom.  The 
junker's  influence  has  its  roots  in  centuries 
of  prerogative.  In  a  generation  Germany 
has  become  a  great  power,  political  and 
economic,  but  in  that  time  there  has  been 
no  material  internal  advance  in  the  direction 
of  freedom.  Constitutional  Government  is 
a  semblance  and  a  pretence,  not  a  reality. 
The  Reichstag  at  first  had  little  enough  influ- 
ence in  shaping  legislation,  compelled  as  it 
was  to  work  with  a  ministry  in  no  wise  re- 

318 


Political  Problems  of  Europe 

sponsible  to  it  and  dependent  for  its  life  only 
on  royal  favor;  but  instead  of  gaining  for 
itself  that  decisive  power  which  the  popular 
house  should  have  in  a  really  representative 
government,  its  actual  authority  has  sub- 
stantially diminished.  It  has  relinquished 
much  of  its  control  over  expenditures,  and 
has  also  limited  its  power  over  income  by 
agreeing  to  an  arrangement  for  a  rigid  and 
intricate  system  of  taxation  which  in  its 
detail  has  no  flexibility  even  to  the  wishes 
of  the  majority. 

Germany  is  governed  by  a  bureaucracy, 
and  in  many  ways  better  governed  than  any 
other  nation  in  the  world.  Popular  repre- 
sentation has  little  existence,  and  the  voice 
of  the  people  small  influence.  Without  a 
doubt  the  German  governmental  organiza- 
tion is  the  best  bureaucracy,  the  most  scru- 
pulously honest,  and,  within  its  lights,  the 
most  painstaking  and  hard-working,  that 
any  government  has  trained  to  its  aid;  but 
the  results  are  not  popular  government.  The 
seeds  of  a  desire  for  popular  government 
were  long  ago  sown  in  Germany.  It  is  an 
expression  of  that  desire,  it  is  the  political 
determination  of  the  common  people  to  write 
"  truth  "  into  the  constitution,  that  gave  the 
Social  Democratic  party  in  the  last  election 
three  million  votes  —  just  under  a  third  of 
the  total.     But  the  tremendous  growth  and 

3^9 


Business  and  Education 

the  sweeping  victories  of  that  party  are  not 
to  be  taken  as  showing  a  disposition  on  the 
part  of  the  German  voter  violently  to  over- 
throw existing  conditions.  They  are  critical 
of  the  growing  expenditures  of  the  Govern- 
ment, particularly  for  the  navy,  and  they 
resent  the  injustice  of  the  arrangement  of 
the  constituencies  under  which  there  is  the 
greatest  inequality  of  representation  in  the 
Reichstag.  They  are  a  party  of  protest 
against  many  existing  conditions,  but  they 
do  not  threaten  the  permanency  of  Govern- 
ment ;  and  as  they  are  sobered  by  increasing 
power  and  responsibility,  their  programme 
becomes  in  the  main  one  which  the  average 
American  voter  would  regard  as  an  enunci- 
ation of  fundamental  principles  of  political 
equality  and  good  government. 

The  point  of  view  of  the  Social  Demo- 
crats is  mainly  economic.  They  believe  that 
the  present  economic  development  —  a  de- 
velopment nowhere  better  illustrated  than  in 
Germany  —  makes  necessary  new  political 
conditions.  They  see  in  that  development 
influences  leading  inevitably  to  the  greater 
and  greater  substitution  of  machinery  for 
hand  employment,  to  the  stifling  of  small 
industries  by  great  combinations.  They 
believe  that  it  has  a  tendency  to  place  the 
means  of  production  within  the  exclusive 
control  of  a  comparatively  small  number 
320 


Political  Problems  of  Europe 

of  people,  and  they  hold  that  this  small  group 
has  monopolized  more  than  its  share  of  those 
advantages  brought  about  by  the  increase 
in  productive  capacity.  They  are  thus  led 
to  believe  that  this  whole  economic  develop- 
ment makes  necessary  a  revision  of  settled 
convictions  both  in  regard  to  capital  and  the 
influence  of  the  state  on  economic  life.  They 
hold  in  general  that  the  authority  of  capital 
must  be  narrowed,  while  the  limits  and  rights 
of  the  state  to  exercise  control  in  economic 
affairs  must  be  enlarged.  So  much  for  their 
strictly  socialistic  doctrines.  They  have 
come  to  be  notably  mild,  and  there  has  been 
eliminated  so  much  of  what  was  the  old 
school  of  collective  socialism  that  the 
party  seems  hardly  entitled  to  the  name  of 
Socialist. 

The  great  wave  of  Socialism  which  has 
swept  over  Germany  is  really  only  a  wave 
of  liberalism;  the  foundations  of  the  Gov- 
ernment are  in  no  wise  shaken  by  it.  Most 
of  the  demands  which  the  triumphant  Social- 
ist party  make  are  of  a  character  which  will 
tend  toward  increased  industrial  efficiency 
should  the  Socialist  go  on  toward  even 
greater  success. 

Germany,  then,  I  believe,  is  a  field  which 
we  should  watch  with  the  most  intense  in- 
terest for  the  evolution  in  political  life  which 
is  sure  to  come,  but  that  evolution  has  in  it 

21  321 


Business  and  Education 

only  promise  of  stronger  and  better  gov- 
ernment, and  no  sign  of  anything  that 
threatens  the  Government's  permanence. 
There  is  much  which  we  might  well  envy  in 
the  practical  accomplishments  of  the  German 
Government  in  the  aid  it  gives  to  industry 
and  the  effect  it  has  on  commercial  life;  in 
the  thoroughness  and  honesty  of  administra- 
tion, and  in  the  substantial  benefits  received 
by  every  citizen.  Whatever  there  is  of  evo- 
lutionary change  in  the  future  promises 
more,  not  less,  efficient  aid  to  industry. 
Whatever  modifications  are  worked  out  in 
the  national  life  —  and  there  may  be  many 
—  promise  to  result  in  giving  Germany 
better  government,  and  in  furnishing  a 
more  secure  foundation  for  the  upbuilding 
of  her  industrial  life,  developing  her  as 
a  competitor  and  strengthening  her  as  a 
rival. 

Beyond  all  question  America's  greatest 
industrial  competitor  is  Germany;  the  devel- 
opment in  political  life  there  promises  no 
reactionary  tendency  in  respect  to  industrial 
efficiency.  Great  as  Germany  is  to-day  as  an 
industrial  competitor,  the  coming  years  will 
make  her  greater. 

Although  we  may  find  in  France  and  Ger- 
many a  preponderance  of  reasons  pointing 
to  political  stability,  what  of  Austria-Hun- 
gary? Is  the  political  life  of  the  dual  mon- 
322 


Political  Problems  of  Europe 

archy  near  its  end?  Is  there  to  be  dismem- 
berment, with  all  the  endless  consequences 
to  European  politics  which  a  partitioning  of 
the  empire  would  engender?  Any  amount 
of  support  can  be  found  for  the  most  pessi- 
mistic views  in  regard  to  Austria's  political 
future.  Statesmen  and  journalists  have  not 
hesitated  to  write  most  frankly  of  their 
belief  that  great  changes  are  impending 
there.  Diplomats  of  experience  may  be 
found  who  hold  the  opinion  that  the  funeral 
bells  of  Franz  Joseph  will  ring  down  the 
curtain  on  the  last  act  of  the  Hapsburg  sway, 
and  that  will  be  true  in  spite  of  the  age  of 
the  empire,  the  strength  of  tradition,  and 
the  convulsion  which  the  whole  political 
fabric  of  Europe  will  undergo. 

Certain  it  is  that  Austria-Hungary  in  its 
potentiality  for  political  change  is  the  most 
interesting  country  in  Europe.  The  em- 
pire, with  its  peculiar  duality  of  emperor  and 
king,  its  two  capitals,  its  triple  ministry,  its 
six  chambers,  its  eighteen  parliaments,  and 
its  dozen  nationalities,  offers  a  conglomera- 
tion of  political  ideas  and  ideals  of  racial 
antagonism  and  of  parliamentary  inconsist- 
encies which  have  strained  to  the  utmost 
the  diplomacy  of  the  beloved  monarch. 
Franz  Joseph  has  in  many  ways  ideally  man- 
aged the  difficulties  of  his  position.  With- 
out great  strength,  with  his  whole  political 

323 


Business  and  Education 

creed  a  belief  in  compromise  which  should 
not  give  up  the  essentials  of  power,  and  in 
diplomacy  which  should  play  off  one  war- 
ring element  against  another,  and  leave  the 
throne  unharmed,  he  has  found  success  beset 
by  many  difficulties.  Had  he  not  possessed 
a  personality  which  has  strongly  attached  to 
him  the  great  majority  of  his  turbulent  sub- 
jects, it  is  hard  to  see  how  he  could  have 
succeeded  at  all. 

The  average  American  hardly  appreciates 
the  political  significance  of  the  Empire  of 
Austria-Hungary,  nor  the  vast  importance 
of  the  situation  there  to  the  future  of  Europe. 
Government  there  is  more  a  display  of 
hysterical  sentiment  than  a  political  organi- 
zation for  national,  industrial,  and  commer- 
cial advancement.  It  is  not  easy  for  us,  with 
our  assimilative  power  of  turning  all  nation- 
alities into  Americans,  to  comprehend  the 
intensities  of  the  racial  antagonisms  of 
Europe.  Nowhere  do  these  antagonisms 
find  freer  play  than  in  Austria-Hungary. 
The  Poles  and  Bohemians  retain  memories 
of  a  past  political  greatness.  The  Magyars 
have  as  keen  a  pride  of  race  as  any  living 
people.  Every  one  of  the  dozen  nationali- 
ties of  the  empire  has  racial  ambitions  of  its 
own,  an  almost  fanatical  determination  to 
exalt  this  language  or  that,  and  a  total 
disregard  for  the  general  welfare  in  the 
324 


Political  Problems  of  Europe 

struggle  of  many  tongues  and  various  racial 
ideals. 

It  seems  absolutely  hopeless  to  expect  that 
the  Austria-Hungarian  Empire  will  eventu- 
ally constitute  itself  into  a  confederacy  after 
the  German  model  —  compact,  homoge- 
neous, centralized.  If  one  looks  for  such 
agreement  as  affording  the  only  political 
bands  that  can  permanently  bind  Austria 
together,  it  is  easy  to  conclude  that  dissolu- 
tion, dismemberment,  and  partitioning  must 
be  written  into  her  future,  or  to  believe,  as 
some  do,  that  the  future  of  the  dual  empire 
can  be  compassed  in  a  sentence  —  that  it  is 
to  be  a  new  Balkan  with  a  dozen  little  nations 
all  at  war,  and  in  their  racial  prejudices  that 
touch  of  fanaticism  which  will  make  them 
irreconcilable  enemies. 

There  are  numberless  reasons  which  can 
be  brought  forward  pointing  to  the  end  of 
the  Hapsburg  reign;  but  unpromising  and 
complicated  as  the  situation  is,  there  is  one 
impressive  reason  stronger  than  all  those 
that  point  to  dissolution,  one  reason  why  the 
empire  will  go  on  even  after  Franz  Joseph's 
death  and  the  coming  of  a  far  less  politic 
ruler:  No  European  nation  is  anxious  for 
Austria's  territory. 

In  spite  of  all  the  ambition  with  which 
Germany  is  credited,  the  weight  of  opinion 
in  Germany  is  unfavorable  to  any  extension 

325 


Business  and  Education 

of  territory  at  Austria's  expense.  There  are 
reasons  enough  apparent  why  Hungary,  with 
its  racial  prejudices,  its  own  national  ambi- 
tion, and  the  certainty  of  its  forming  a  new 
Reichstag  party,  should  not  be  brought  into 
the  empire.  There  are  reasons  almost  as 
potent  why  the  German  provinces  of  Austria 
would  not  be  welcome.  It  is  true  those 
provinces  are  thoroughly  German  in  lan- 
guage, sentiment,  thought,  and  aspiration. 
Their  folk  songs  and  poetry  are  full  of  long- 
ing for  union  with  the  Fatherland,  but  there 
is  no  sentiment  among  the  influential  people 
of  Germany  which  would  tend  toward  tak- 
ing these  provinces  into  the  empire,  bringing, 
as  they  would,  a  great  addition  to  the 
strength  of  the  Clerical  party,  and  laying  on 
the  Government  responsibility  and  difficul- 
ties out  of  proportion  to  anything  that  would 
be  gained.  Russia  has  quite  problem  enough 
with  her  Poles,  without  wanting  to  reunite, 
by  an  absorption  of  Austrian  territory,  two 
parts  of  once  partitioned  and  always  un- 
happy Poland,  and  thus  give  new  life  to  that 
national  feeling  which  it  has  cost  so  much  to 
subdue.  The  desire  for  a  partitioning  of 
Austria  does  not  exist  with  the  governments 
of  the  other  great  powers;  but  violent  as 
are  the  internal  dissensions,  most  of  these 
differences  will  be  temporarily  harmonized 
before  the  danger  of  any  development  that 
326 


Political  Problems  of  Europe 

looks  like  a  recoloring  of  the  map  and  an 
absorption  into  the  stronger  nationality  of 
Teuton  or  Slav. 

A  vast  force  is  wasted  in  the  Austrian 
Empire  by  racial  antagonism  and  parlia- 
mentary strife.  Industry  and  commerce  are 
kept  humbly  waiting  while  parliamentary 
mobs  shriek  in  a  babel  of  uncomprehended 
tongues.  The  whole  economic  life  and 
development  is  hampered,  and  there  is  little 
reason  to  hope  for  better  things.  But  there 
is  even  less  reason,  I  believe,  to  expect  that 
the  political  bands  which  hold  these  warring 
elements  into  an  empire  will  be  broken,  and 
that  there  will  be  liberated  in  the  very  centre 
of  the  European  balance  of  power  a  dozen 
independent  nationalities  to  make  a  convul- 
sion that  would  be  as  terrible  perhaps  as  the 
events  following  the  French  Revolution. 

An  ambassador  at  St.  Petersburg,  who 
had  had  experience  in  many  European 
courts,  once  said  to  me : 

"  I  cannot  put  too  strongly  my  belief  in 
the  solidity  of  the  Government  of  Russia. 
Considering  its  vastness  it  is  the  most  per- 
fect going  machine  in  existence.  I  have 
known  Russia  many  years,  and  I  believe  the 
Government  grows  stronger  rather  than  less 
secure.  The  Government  is  in  the  awkward 
position  of  having  to  solve  the  double  prob- 
lem  of   advancing   and   standing   still.      It 

327. 


Business  and  Education 

desires  to  advance  industrially  and  commer- 
cially, but  it  must  stand  still  as  an  autocracy. 
For  it  to  thus  stand  still  there  cannot  be  too 
much  education.  The  strongest  influences 
in  the  empire  to-day  are  on  the  side  of  the 
Government,  and  those  factors  are  always 
growing  stronger.  There  wnll  some  day,  of 
course,  be  political  advancement;  but  any 
one  who  believes  that  the  occasional  plots 
and  disturbances  that  get  to  the  surface 
here  point  to  any  real  danger  to  the  founda- 
tions of  Government  has  but  a  superficial 
knowledge." 

This  view  may  not  be  generally  agreed  to 
in  the  light  of  developments  in  connection 
with  the  Japanese  war.  I  know  that  there 
are  observers  of  Russian  conditions,  whose 
opinion  is  well  worthy  of  attention,  who 
believe  that  Russia  is  on  the  point  of  a  great 
political  upheaval.  The  weakness  of  the 
Czar,  the  corruption  of  the  bureaucracy,  the 
inefficiency  of  government  which  has  at 
some  points  been  disclosed  by  the  events  in 
the  Far  East,  lead  them  to  believe  that  a 
political  awakening  is  near,  that  possibly  the 
great  territory  to  the  east  of  Little  Russia, 
which  has  been  filled  by  adventurous  exiles 
and  progressive  emigrants,  will  break  off 
from  the  old  autocracy  and  form  an  inde- 
pendent government.  All  that  might  hap- 
pen without  greatly  affecting  political  con- 
328 


Political  Problems  of  Europe 

ditions  in  Russia  itself.  The  day  will  un- 
doubtedly come  when  a  constitution  will  be 
granted,  but  even  that  in  itself  will  not 
greatly  change  conditions.  Whoever  has 
travelled  in  Russia  away  from  the  cities, 
observed  the  inertia  of  that  vast  population 
of  peasants,  noted  the  influence  of  the 
Church,  and  how  it  has  been  used  as  a 
branch  of  the  civil  service  in  the  control  of 
the  population,  will  understand  how  slow 
must  come  any  political  changes  which  will 
really  radically  affect  the  national  life. 

My  own  observation,  which  has  covered 
a  good  deal  of  Russia,  bears  out  most  fully 
the  expert  opinion  expressed  above.  There 
may  be  some  slow  evolution  toward  more 
popular  political  ideals,  but  the  strength  and 
solidity  of  the  Russian  Government  is  beyond 
our  day  to  question. 

Such  a  survey  of  Europe,  then,  as  a 
journeyman  business  man  might  take,  can 
but  lead,  it  seems  to  me,  to  the  conclusion 
that  on  the  whole  European  political  condi- 
tions to-day  point  to  solidity  and  security. 
There  will  be  change,  but  the  change  will 
be  development  along  right  economic  lines. 
There  is  no  reason  to  suppose  that  the  de- 
velopment of  political  events  is  to  make 
Europe  less  strong  and  able  as  an  industrial 
competitor.  From  an  economic  point  of 
view  the  political  outlook  there  can  be  re- 
329 


Business  and  Education 

garded  with  optimism.  The  development  of 
politics  and  the  evolution  of  government 
give  promise  of  working  toward  greater 
economic  efficiency,  toward  a  more  capable 
industrialism  and  an  expanding  commerce. 

II.    France  and  the  Clerical 
Problem 

In  the  United  States  the  business  of  Gov- 
ernment is  the  government  of  business. 
Questions  which  come  before  Congress  are 
nearly  always  related  to  business  affairs. 
Once  the  running  of  the  machinery  of  Gov- 
ernment has  been  provided  for,  and  the  great 
appropriation  bills  passed,  the  further  sub- 
jects of  congressional  legislation  are  with 
rare  exceptions  directly  concerned  with 
commercial  or  industrial  matters.  Congress 
is  a  board  of  directors  of  a  vast  business 
corporation;  its  problems  are  business  prob- 
lems; its  main  work,  outside  of  the  con- 
duct of  the  Government  departments,  is  the 
fostering  of  business  interests,  on  the  one 
hand,  and,  on  the  other,  the  control  of  busi- 
ness organizations. 

There  is  not  a  member  of  either  house  of 
Congress  who  cannot  with  justice  lay  some 
claim  to  familiarity  with  business  matters. 
The  chief  interests  of  all  these  members  of 
Congress  are  business  interests.     The  great 

330 


Political  Problems  of  Europe 

legislative  mainspring  is  the  well-being  of 
the  nation's  commercial  and  industrial  life. 

In  European  politics,  legislative  condi- 
tions and  questions  are  widely  different  from 
those  in  our  own  political  life.  The  Ameri- 
can is  at  once  struck  by  the  peculiar  fact 
that  business  men  have  small  place  in  the 
parliaments  there.  Business  questions  are 
overshadowed  by  questions  relating  to  class 
prerogative,  racial  domination  and  antag- 
onism, church  authority,  bureau  patronage, 
hereditary  power.  Legislative  programmes 
frequently  turn  upon  points  of  sentiment 
—  sentiment  of  race,  of  religion,  of  class, 
of  political  theory,  or  dynastic  hope. 
Broadly  speaking,  there  is  no  party  on  the 
Continent  standing  solely  for  a  commercial 
idea.  There  is  no  party  programme  that 
solidly  unites  its  followers  for  or  against 
some  commercial  measure.  The  platform 
of  parties,  the  issues  on  which  elections  turn, 
the  proposals  brought  forward  for  legisla- 
tive consideration,  have  comparatively  little 
concern  with  industry  and  commerce. 

The  business  man's  first  surprise  is  over 
the  number  of  controversies  in  the  political 
life  of  Europe  having  no  bearing  at  all  on 
business.  He  finds  there  many  important 
public  questions  attracting  the  keenest  in- 
terest of  a  whole  nation,  but  having  no  re- 
lation to  the  financial  income  of  voters. 

32^ 


Business  and  Education 

The  European  business  man  does  not  take 
to  politics,  nor  does  he  seem  to  be  much 
wanted  in  the  pohtical  councils.  There  are 
three  hundred  members  of  the  French  Sen- 
ate, and  only  forty  of  these  are  in  any  way 
connected  with  commerce  or  industry.  In 
the  French  Assembly  the  business  man  is 
almost  a  total  stranger.  In  the  Reichstag 
at  Berlin  business  interests  are  better  rep- 
resented, but  in  the  parliamentary  bodies  at 
Vienna  and  Budapest,  where  sound  commer- 
cial legislation  is  needed  as  much  as  any- 
where else  in  Europe,  there  is  heard  only 
endless  wrangling  of  many  races.  The  con- 
servative, sensible  voice  of  the  experienced 
business  man  is  rarely  heard  effectively  in 
Vienna  among  those  diverse  tongues  which 
will  unite  in  no  phrase  unless  it  means  legis- 
lative obstruction. 

The  parliaments  of  Europe  are  far  less 
representative  of  the  people  than  is  the  case 
with  us.  Under  the  unfair  system  of  ap- 
portionment in  Germany  and  Austria  a  leg- 
islature representative  of  the  people  is  out 
of  the  question.  Emperor  William's  excur- 
sions into  world  politics  would  be  rudely 
checked  were  his  actions  controlled  by  a 
Reichstag  truly  representative  of  the  will 
of  the  majority  of  his  subjects.  In  France 
the  best  elements  of  the  population  seem  to 
view  politics  as  they  would  a  sinful  occupa- 

332 


Political  Problems  of  Europe 

tion.  The  French  Chamber  is  made  up 
of  the  most  voluble  and  least  valuable 
elements  of  the  nation.  It  has  been  well 
said  that  France  presents  the  spectacle  of 
a  tranquil  nation  with  an  agitated  legisla- 
ture, and  that  in  the  Chamber,  members 
freely  apply  such  fitting  epithets  to  one  an- 
other as  irresponsible,  riotous,  ill-mannered, 
and  incoherent,  while  the  great  majority 
of  the  people  whom  these  men  represent 
are  peaceful,  thrifty,  orderly,  sober,  and 
industrious. 

No  single  language  could  produce  the 
wealth  of  epithets  that  abound  among  the 
hysterical  Czechs,  Croats,  and  the  dozen 
other  races  in  the  Parliament  of  Vienna. 
Many  of  these  distinguished  statesmen  re- 
gard as  the  most  complete  political  success 
that  action  which  will  effectually  block  all 
legislation.  Political  villification  in  the 
Italian  Chamber  has  been  cultivated  to  such 
a  fine  art  that  none  but  the  bravest  or  the 
brazenest  of  statesmen  can  there  be  induced 
to  take  ofBce. 

When  comparisons  are  made  between 
America  and  Continental  Europe,  we  can 
find  much  of  which  to  be  proud.  Our 
growth,  our  wealth,  our  industries,  our  re- 
sources, our  energy,  all  make  flattering  com- 
parison with  average  European  conditions. 
But  I  believe,  in  making  such  comparisons, 

333 


Business  and  Education 

there  is  no  one  thing  of  which  we  have  the 
right  to  be  more  proud  than  of  the  Congress 
of  the  United  States.  Better  than  any  Con- 
tinental parhament,  it  represents  the  people. 
The  one  legislative  body  of  the  world  that 
is  in  any  way  comparable  to  ours  is  the  Par- 
liament of  Great  Britain.  In  character,  in- 
tellect, methods,  dignity,  and  in  the  truth- 
fulness with  which  each  represents  the 
people,  the  British  Parliament  and  the 
United  States  Congress  stand  in  a  class  quite 
apart  and  above  any  of  the  parliaments  of 
Continental  Europe. 

The  parliamentary  system  has  nowhere 
on  the  Continent  developed  along  lines 
which  produce  the  best  results.  The  tem- 
perament of  the  Continental  nations  is  not 
well  adapted  to  party  discipline.  In  a  par- 
liamentary system  working  at.  its  best  there 
must  be  a  party  of  the  Government  and  a 
strongly  united  opposition  —  two  parties 
with  well-defined  lines  of  demarcation.  No- 
where on  the  Continent  does  that  condition 
exist.  Political  inclination  there  tends  to 
the  formation  of  many  groups  rather  than 
two  parties.  The  lines  separating  these 
groups  are  usually  far  from  clear.  An 
American  must  be  struck  by  the  obvious 
fact  that  seldom  is  the  main  consideration 
which  holds  a  group  together  a  distinct 
commercial  idea  or  programme. 

334 


Political  Problems  of  Europe 

Germany  in  some  ways  is  an  exception. 
Nowhere  else  in  the  world  can  be  found 
such  sharp  party  discipline  as  in  the  Social 
Democratic  party  of  Germany.  Elsewhere, 
however,  the  political  groups  are  but  loosely 
bound  together.  The  bonds  are  usually  of 
a  sentimental  or  racial  character,  or  a  fleet- 
ing attachment  to  some  political  leader. 
Plans  for  sound  economic  legislation  looking 
toward  the  development  of  the  industrial  and 
commercial  life  of  the  nation  seem  not  to 
offer  sufficiently  potent  reasons  anywhere 
in  Europe  for  holding  together  a  political 
party.  In  England,  at  the  moment,  there  is 
a  sensational  exception.  Mr.  Chamberlain's 
fiscal  policy,  a  purely  commercial  pro- 
gramme, has  made  a  new  and  clean-cut  line 
of  cleavage  in  British  politics  and  has 
brought  about  one  of  the  most  remarkable 
political  situations  which  England  has  seen 
within  the  last  fifty  years. 

There  is  one  type  of  problem  to  be  found 
in  almost  every  country  in  Europe  from 
which  happily  we  are  in  America  altogether 
free.  It  has  to  do  in  one  form  or  another 
with  the  relations  between  Church  and  State. 
It  will  be  more  clearly  comprehended  how 
great  a  blessing  it  is  for  us  to  be  free  from 
such  controversies  when  something  is  un- 
derstood of  the  bitterness,  the  blind  sacrifice 
of  general  good,  and  the  countless  obstacles 

335 


Business  and  Education 

in  the  way  of  political  progress  which  these 
struggles  engender. 

The  most  striking  instance  of  such  a 
problem,  and  one  with  a  phase  particularly 
unfamiliar  to  us,  is  the  French  clerical  ques- 
tion. In  every  European  country  there  is 
more  or  less  state  support  of  the  Church, 
and  that  has  everywhere  resulted  in  the  re- 
lations between  the  Church  and  State  form- 
ing at  times  the  subject  of  bitter  controversy. 
Not  only  has  the  one  absorbing  political 
question  in  France  for  several  years  been 
the  suppression  of  the  religious  orders,  but 
in  Italy  the  strained  relations  between  the 
Vatican  and  Quirinal  form  always  an  im- 
portant feature  of  the  situation.  In  Italy 
the  problem  reaches  down  into  the  very  roots 
of  political  life,  and  must  for  a  long  time 
have  a  profound  effect  on  the  national  de- 
velopment, presenting  as  it  does  a  contro- 
versy of  the  first  importance  at  every  elec- 
tion and  at  every  session  of  Parliament. 

A  majority  of  the  most  intelligent  and 
best  meaning  voters  of  France  believe  that 
the  life  of  the  republic  has  been  in  peril. 
The  general  attitude  of  the  Church,  and 
particularly  the  character  of  the  teaching 
of  the  religious  orders,  are  the  sources 
of  this  supposed  danger.  Nearly  half  of 
the  youth  of  France  have,  even  in  recent 
years,  received  instruction  in  clerical  schools. 

336 


Political  Problems  of  Europe 

The  belief  is  firmly  fixed  in  the  minds  of 
more  than  half  of  the  voters  that  this  in- 
struction has  tended  to  raise  up  enemies  of 
France. 

The  struggle  against  the  powerful  reli- 
gious orders  is  by  no  means  a  new  one  there. 
When  the  present  Government  came  into 
office,  with  Waldeck-Rousseau  as  Premier, 
the  particular  mandate  which  it  had  from 
the  voters  was  to  curb  the  power  of  the 
religious  orders,  and  especially  to  restrict 
their  rights  to  teach.  Curiously  the  law 
which  Waldeck-Rousseau  framed  in  1901 
almost  exactly  duplicated  one  which  had 
been  passed  a  hundred  and  fifty  years  ago. 
The  orders  flourished  in  spite  of  a  century 
and  a  half  of  restrictive  legislation.  When 
the  present  Government  began  its  campaign 
of  repression,  there  were  325,000  members 
of  the  orders.  They  held  real  estate  valued 
at  more  than  a  billion  francs,  and  one  of  the 
complaints  against  them  that  particularly 
appealed  to  the  small  landowner  was  that 
so  vast  a  property  had  almost  completely 
been  withdrawn  from  productive  usefulness. 
The  personal  wealth  of  the  orders  was  so 
great  it  would  be  difficult  to  estimate  it.  Its 
extent  is  illustrated  by  the  fact  that  when 
the  prosecution  became  severe  the  sales  of 
their  French  Government  securities  were 
great  enough  to  be  the  main   factor  in  a 

^2  337 


Business  and  Education 

market  decline  that  was  regarded  almost  as 
a  national  calamity. 

A  feature  of  the  situation  that  has  been 
particularly  trying  has  been  the  unstinted 
use  of  this  wealth  in  elections  to  secure  the 
success  of  clerical  candidates,  or  rather,  to 
compass  in  any  way  possible  the  defeat  of 
the  Republicans. 

The  relations  between  Church  and  State 
in  France  are  defined  by  a  concordat  which 
stands  to-day  as  Napoleon  drew  it.  Catho- 
lics, Protestants,  and  Jews  all  receive  allow- 
ances from  the  State,  although  the  Catholic 
Church  receives  41,000,000  francs  of  the 
43,000,000  of  such  church  subsidies. 

The  student  of  French  institutions  finds 
the  living  genius  of  Napoleon  in  many 
phases  of  government  to-day.  He  seems 
less  like  a  deposed  ruler  against  whose  sys- 
tem of  politics  nearly  a  century  of  effort 
has  been  directed  than  like  a  vigorous  sov- 
ereign absent  from  France  on  a  brief  vaca- 
tion. The  influence  of  Napoleon,  in  the 
stamp  he  left  on  French  institutions,  seems 
after  the  vicissitude  of  succeeding  monarchy, 
empire,  and  republic,  and  the  passing  of 
nearly  a  century  greater  than  that  of  any 
living  man.  And  so  this  concordat,  which 
he  drew  in  1801,  and  which  has  passed  un- 
changed through  succeeding  forms  of  gov- 
ernment, has  remained  to  become  the  chief 

338 


Political  Problems  of  Europe 

problem  of  French  politics  more  than  a  cen- 
tury after  it  was  signed.  The  concordat  re- 
established the  legal  existence  of  the  Cath- 
olic Church,  which  had  been  annulled  by  the 
Revolution.  The  ecclesiastical  property  con- 
fiscated by  the  Republican  Government  was 
not  restored,  and  the  Pope  and  his  succes- 
sors were  bound  not  to  move  to  disturb  the 
purchasers  of  such  property.  Provision  was 
made  for  state  support  of  bishops  and  clergy 
in  lieu  of  their  appropriated  property.  The 
Government  was  given  the  right  to  nominate 
bishops.  The  Church,  therefore,  has  nat- 
urally and  inevitably  been  deeply  interested 
and  constantly  an  important  factor  in  French 
politics.  When  the  present  republic  came 
into  being,  a  republic  without  republicanism, 
as  it  was  called  on  the  assembling  of  the 
first  Chamber,  the  Republicans  would  have 
been  in  a  hopeless  minority  had  it  not  been 
for  the  discord  between  Royalists  and  Bona- 
partists.  The  Clerical  party  was  distinctly 
anti-republican,  and  by  its  political  activity 
and  bitterness  that  party  well  earned  Gam- 
betta's  denunciation  as  an  enemy  of  the  re- 
public. His  "  Le  clericalisme,  voila  Ten- 
nemi  "  has  for  thirty  years  been  a  political 
war-cry. 

Those  who  stand  for  the  Republic  have 
come  naturally  to  count  the  Clericals  as  the 
enemies  of  the  State.     The  Clericals  have 

339 


Business  and  Education 

left  no  lack  of  reason  that  this  should  be 
so.  However  vigorously  the  Republicans 
might  fight  the  Clericals  at  the  polls  or  de- 
nounce them  in  the  Chamber  they  felt  al- 
ways the  quicksand  in  the  ground  on  which 
the  enemies  of  clericalism  were  standing, 
because  the  next  generation  of  voters  were 
growing  up  in  the  clerical  schools  and  re- 
ceiving instruction  which,  even  though  it 
hardly  warranted  the  charge  of  being  directly 
seditious  and  threatening  to  the  life  of  the 
State,  was  certainly  not  designed  to  make 
these  youths  Republicans. 

This  state  of  affairs  resulted  in  a  plat- 
form which  was  larger  than  any  single  party, 
a  so-called  Programme  of  Republican  De- 
fence, on  which  there  has  been  room  not 
only  for  Republicans  to  stand,  but  breadth 
enough  for  Radicals  and  Socialists  as  well. 
It  has  furnished  the  basis  for  the  coalition 
of  parties  which  forms  the  present  Govern- 
ment and  has  made  the  common  ground  on 
which  these  groups,  holding  in  some  re- 
spects most  divers  political  faiths,  could  be 
united  into  what  is  known  as  the  Republican 
"  Bloc." 

The  first  change  in  the  law  as  made  by 
Waldeck-Rousseau  in  1901  only  went  so 
far  as  to  compel  the  orders  to  obtain  au- 
thorization from  the  Government  for  their 
legal    continuation.      After   Waldeck-Rous- 

340 


Political  Problems  of  Europe 

seau  gave  way  to  Combes,  the  Government 
went  at  the  subject  in  the  most  thorough- 
going manner,  its  aim  being  so  effectually 
to  disband  the  orders  that  there  should  be 
no  possibility  of  their  return  to  instil  into 
the  minds  of  the  French  youth  doubts  and 
questions  as  to  the  republic. 

The  struggle  is  one  of  the  sort  in  which 
there  can  be  drawn  no  straight  line  of  right 
and  wrong.  It  is  undoubtedly  true  that  the 
traditional  attitude  of  the  Church  and  of 
the  Clerical  party  has  been  reactionary  and 
generally  unfriendly  to  the  republic,  that 
the  character  of  the  teaching  by  the  orders 
has  been  open  to  most  reasonable  and  vig- 
orous objection  by  those  who  hold  firm  faith 
in  the  principles  of  republicanism.  It  is  true 
that  the  Church  has  been  active  in  public 
affairs,  perhaps  fairly  earning  the  charge 
that  clericalism  is  a  movement  "  that  tres- 
passes, in  the  name  of  the  Christian  faith, 
on  the  domain  of  politics,  and  that,  under 
the  cover  of  religion,  menaces  the  tran- 
quillity of  the  state."  There  has  been 
ground  for  objection  to  the  growth  of  the 
wealth  of  the  monastic  orders,  especially 
when  they  were  directly  engaged  in  com- 
mercial affairs.  Particularly  has  there  been 
room  for  objection  when  they  used  their 
wealth  to  influence  elections.  The  more 
rapid  advance  of  those  army  officers  who 

341 


Business  and  Education 

were  educated  in  the  clerical  schools,  com- 
pared with  those  who  received  their  edu- 
cation elsewhere,  has  been  an  annoying  evi- 
dence of  the  solidarity  of  clerical  influence. 
There  have  been  bigotry  and  narrowness, 
overzealousness  and  defiance  of  law,  priestly 
exhortation  better  fitted  to  the  stump  than 
the  pulpit,  and  even  counselling  toward  re- 
sistance and  defiance  of  law  that  was  well 
fitted  to  neither. 

It  must  be  remembered,  however,  that 
there  has  existed  a  great  and  respectable 
minority  holding  the  most  sincere  belief  in 
the  unwisdom  of  this  restrictive  legislation. 
The  programme  of  the  Government  has 
struck  at  the  deepest  sensibilities  of  this  mi- 
nority. There  has  seemed  to  be  undue  haste 
and  needless  harshness.  The  subject  touched 
many  interests  and  appealed  to  many  senti- 
ments and  prejudices.  It  had  taken  the  Re- 
publican party  thirty  years  to  bring  itself 
to  put  its  fears  into  legislative  enactments, 
and  it  could  have  well  afforded  to  have  used 
greater  tact  and  less  haste  in  enforcing  the 
laws  it  passed.  It  has  met  intolerance  with 
intolerance.  It  has  come  dangerously  near 
violating  fundamental  rights  and  liberties 
in  its  struggle  to  subdue  the  orders  which  it 
declared  were  the  particular  enemies  of  those 
very  rights  and  liberties.  It  has  outraged 
the  sentiments  of  a  most  important  minority 
342 


Political  Problems  of  Europe 

and  has  earned  by  its  methods  some  of  the 
epithets  it  has  hurled  so  vigorously  at  its 
adversaries.  Still  it  must  be  remembered 
that  the  Republicans  have  had  to  engage  in 
this  struggle  against  a  most  powerful  antag- 
onist, one  with  wealth,  organization,  time- 
established  position,  and  with  the  great  ad- 
vantage of  religious  bulwarks  behind  which 
to  fight.  It  has  been  war;  and  war  in  pol- 
itics, as  between  armies,  is  not  the  place  to 
look  for  fine  ethical  distinctions. 

The  avowed  aim  of  the  Combes  ministry 
to  create  a  "  lay  "  state  so  far  as  the  schools 
are  concerned,  to  give  to  the  state  a  complete 
monopoly  of  education,  is  now  a  practi- 
cally accomplished  fact.  But  in  setting  up 
in  the  businesses  of  education,  as  in  setting 
up  in  other  businesses,  there  are  attendant 
expenses.  The  Government  has  at  once 
been  placed  under  the  necessity  of  greatly 
extending  the  national  school  system.  Thou- 
sands of  new  schools  must  be  provided. 
The  expenditure  of  sixty  million  francs  is 
at  once  required  for  building  new  school- 
houses.  Then  there  is  an  added  annual 
charge  of  many  million  francs  on  national 
and  local  budgets  to  provide  for  the  salaries 
of  the  great  corps  of  teachers.  Not  only 
were  the  teaching  orders  affected,  but  the 
nursing  orders  were  suppressed  too.  Nearly 
all  the  hospitals  had  been  economically  man- 

343 


Business  and  Education 

aged  by  the  nuns;  the  nuns  were  replaced 
by  lay  workers,  and  the  increased  expendi- 
tures on  that  account  have  been  great. 

The  French  budget  is  one  which  has 
tested  the  keenest  ingenuity  of  each  suc- 
ceeding Finance  Minister  to  reach  a  satis- 
factory balance,  and  all  these  increased  ex- 
penditures are  bringing  forward  practical 
questions  of  revenue  and  taxation  which  are 
not  always  relished  by  even  the  most  zealous 
supporters  of  the  policy  of  suppression. 

The  point  in  all  this  that  seems  specially 
interesting  to  Americans  is  the  nature  of  the 
controversy  and  the  happy  absence  in  our 
own  political  system  of  the  elements  that 
would  make  such  a  controversy  possible. 
Here  we  see  the  political  forces  of  a  great 
nation  absorbed  for  years  in  a  struggle  so 
bitter  as  to  provoke  scenes  of  the  most  vio- 
lent disorder  in  the  Chamber;  and  in  the 
communes  riots,  active  resistance  to  law, 
military  suppression,  and  bloodshed.  We 
observe  a  struggle  in  which  are  brought  into 
fiercest  play  not  only  the  ordinary  political 
passions,  but  one  in  which  bigotry,  pious 
prejudice,  and  exasperated  religious  sensi- 
bilities are  met  by  political  intolerance.  We 
see  arbitrary  power  justifying  in  the  name 
of  liberty  the  invasion  of  fundamental 
rights.  We  note  an  enactment  of  harsh 
and  unjust  laws  which  their  sponsors  be- 

344 


Political  Problems  of  Europe 

lieve  necessary  to  preserve  the  life  of  the 
repubHc. 

Can  we  not,  in  the  face  of  all  that,  listen 
with  some  complacency  to  the  imputation 
that  we  are  a  nation  of  dollar  worshippers 
and  that  we  concern  ourselves  with  no  ques- 
tions of  politics  that  do  not  affect  our 
pocket-books  ? 

In  spite  of  all  the  political  energy  that  has 
for  several  years  gone  into  the  discussion  of 
the  French  schools^  it  has  not,  unfortunately, 
led  directly  toward  any  effort  to  improve 
the  existing  school  system.  No  party  has 
given  serious  consideration  to  a  plan  insur- 
ing better  educational  preparation  for  the 
French  youth.  No  party  has  made  the  de- 
velopment of  a  system  of  technical  schools 
or  the  introduction  of  commercial  training 
an  important  part  of  its  programme. 

The  political  life  of  the  French  nation  has 
for  several  years  centred  exclusively  about 
the  school  system,  but  there  has  been  no 
awakening  there  to  the  need  of  advanced 
methods  nor  to  the  advantage  of  new 
courses  such  as  have  been  adopted  with  ad- 
mirable results  in  Germany.  That  was  of 
course,  impossible,  considering  the  nature 
of  the  controversy.  It  will  be  hardly  pos- 
sible for  some  years  to  come.  The  national 
school  system  must  now  be  organized  and 
developed,  and  for  a  long  time  there  will  be 

345 


Business  and  Education 

work  enough  to  do  to  get  it  in  smooth  run- 
ning order,  leaving  Httle  room  to  expect 
radical  improvement  in  methods  or  extension 
of  scope.  What  has  been  going  on  in  France 
is  a  fundamental  struggle  between  the 
Church  and  State.  Ultimately  education 
will  probably  be  benefited,  but  those  on  each 
side  of  the  controversy  have  had  only  in 
mind  the  question  as  to  which  should  con- 
trol the  educational  system. 

The  eventual  denunciation  of  the  concordat 
is  one  of  the  certainties  of  French  politics. 

There  are  reasons,  however,  why  the 
movement  may  now  pause.  There  are  other 
pressing  questions,  and  the  forces  back  of 
them  are  in  a  measure  interlocked  with 
those  which  have  dominated  the  anti-clerical 
struggle  —  especially  is  that  true  of  the  de- 
mand of  the  Socialists.  The  consideration  of 
that  subject  must  be  left  to  a  later  paper, 
as  must  also  the  aspect  of  the  Socialist  move- 
ment in  other  countries  beside  France. 

III.  The  Progress  of  Socialism 
Socialism  is  a  live  political  factor  in  Eu- 
rope. There  is  a  wave  of  socialism  flowing 
over  the  whole  Continent,  reaching  heights 
of  much  importance  in  Germany,  Belgium, 
and  France,  and  giving  a  distinct  trend  to 
political  life  in  Austria  and  Italy. 

It  is  of  great  importance  to  us  because  of 
346 


Political  Problems  of  Europe 

the  vital  effect  which  the  success  of  the  social- 
ist parties  would  have  on  European  institu- 
tions and  upon  the  social  and  industrial  con- 
ditions there.  Of  even  wider  importance, 
however,  is  this  great  political  and  social 
movement,  because  it  foreshadows  a  ten- 
dency which  we  are  likely  to  see  gain  great 
force  in  our  own  country.  It  seems  to  me 
not  improbable  that  we  shall,  in  the  next 
few  years,  hear  much  of  socialism  in  our  own 
political  life,  I  do  not  think  it  will  be  sur- 
prising if  we  eventually  find  political  forces 
here  drawn  up  on  a  new  alignment,  with  a 
party  standing  on  a  platform  which  might 
be  made  up  from  principles  taken  from  the 
programmes  of  socialist  parties  of  Europe, 
and  opposed  to  those  who  will  stand  for 
conservatism  and  the  permanence  of  present 
institutions  and  conditions. 

What  a  socialist  party  they  would  make! 
The  discontented  would  find  promise  in  such 
a  platform.  The  believers  in  the  power  of 
legislation  to  work  miracles  in  bringing 
prosperity  and  bettering  social  conditions 
would  find  plans  for  legislative  experiments 
which  would  interest  them.  Those  who  see 
danger  in  aggregated  wealth,  the  opponents 
of  trusts  and  combinations,  the  populists, 
would  all  find  such  a  party  congenial.  The 
advocates  of  Federal  control  of  railways  and 
telegraphs,  and  those  who  think  the  Gov- 

347 


Business  and  Education 

ernment  should  get  deeper  into  finance  and 
organize  postal  savings-banks,  would  find 
planks  which  met  their  views.  One  of  the 
main  tenets  of  faith  would  of  course  be  the 
belief  in  universal  old-age  pensions  and  in 
insurance  to  compensate  for  loss  of  health 
or  employment,  with  the  taxes  for  creating 
such  funds  laid  on  the  incomes  of  the 
wealthy.  Such  a  plank  would  have  wide 
popularity,  and  those  who  are  dissatisfied 
and  who  are  in  favor  of  any  change  or  of 
any  new  legislative  experiment  would  be 
attracted.  We  certainly  have  just  the  sort 
of  material  here  in  plenty  for  the  building 
of  a  socialist  party  along  lines  which  are 
showing  such  vital  force  in  the  political  life 
of  Europe.  And  as  in  Europe,  there  would 
be  much  good  in  the  programme,  and  much 
error,  many  fallacies  for  the  demagogue  to 
rant  over,  much  that  would  be  utterly  im- 
practicable, but  much  that  would  appeal  to 
those  whose  lot  is  less  favorable  than  they 
believe  it  should  be. 

There  are  no  influences  more  likely  to 
bring  change  to  Europe  than  are  those  vari- 
ous political  currents  which  are  combined 
under  the  rather  loose  term  socialism.  I 
believe  there  are  beginning  to  be  seen  in  our 
own  political  life  many  similar  currents.  It 
is  natural  that  those  currents  will  eventually 
come  together  into  a  united  political  party. 
348 


Political  Problems  of  Europe 

Such  a  party  might  be  called  "  Socialist," 
or  it  might  find  some  other  name,  but  it 
would  be  a  party  with  many  of  the  same 
principles  as  those  of  the  socialist  parties  of 
Europe. 

If  we  are  facing  socialism  here,  some 
study  of  the  progress  of  socialism  in  Europe 
is  well  worth  our  while. 

In  France,  the  clerical  question  absorb- 
ing the  main  energies  of  all  parties  for  sev- 
eral years,  as  it  has,  is  second  only  in  polit- 
ical importance  to  the  problems  which  the 
growth  of  socialism  has  there  brought  into 
prominence.  The  position  of  the  Social- 
ists in  influencing  public  affairs  is  much 
strengthened  by  the  fact  that  they  have  been 
essential  allies  of  the  Republicans  in  their 
struggle  with  the  Church.  As  has  been  in- 
dicated in  a  former  paper,^  the  Socialists 
have  presented  a  solid  front  with  the  Repub- 
licans in  the  whole  programme  of  Republican 
defence,  and  now  that  a  decisive  defeat  has 
been  dealt  the  Clerical  party,  the  Socialists 
are  demanding  support  in  turn  from  the  Re- 
publicans. The  position  of  the  Republicans 
makes  the  support  of  the  Socialists  necessary 
to  them,  and  it  is  logical  to  expect  that  the 
Government  programme  will  in  greater  and 
greater  degree  recognize  Socialist  demands. 

The  French  Premier,  M.  Combes,  has  re- 

1  Page  340. 
349 


Business  and  Education 

cently  stated  the  main  objects  of  the  present 
French  ministry,  and  the  programme  as  he 
oiitHned  it  shows  the  influence  of  the  So- 
ciaHsts.  He  has  stated  that  in  addition  to 
the  continuance  of  repressive  measures 
against  rehgious  orders,  the  ministry  pro- 
poses to  pass  laws  on  the  subject  of  work- 
ingmen's  pensions,  adopt  a  comprehensive 
plan  for  the  assistance  of  invalids  and  old 
people,  reform  the  tax  system,  and  reduce 
to  two  years  the  time  of  military  service. 
This  programme  indicates  how  important 
the  Premier  recognizes  it  to  be  that  the 
Socialists  continue  their  support  of  the  Gov- 
ernment. As  the  Socialists  and  Socialist 
Radicals  have  140  members  in  the  Chamber 
of  Deputies,  compared  with  240  Republi- 
cans, it  can  be  readily  seen  what  important 
pillars  of  the  Government  support  they 
form.  The  Socialist  group,  composed,  as  it 
is,  almost  exclusively  of  the  working  class, 
naturally  has  ambitions  that  are  by  no 
means  confined  to  the  programme  of  Repub- 
lican defence.  They  want  legislation  which 
in  their  opinion  will  have  an  important  bear- 
ing on  the  whole  social  order. 

Like  Socialists  everywhere,  they  demand 
much  that  is  utterly  impractical.  The 
Government  has  accepted  a  few  of  their 
most  workable  theories.  If  the  platform  of 
the  revolutionary  Socialists  was  carried  out 

350 


Political  Problems  of  Europe 

there  would  be  a  complete  upsetting  of  the 
Government,  for  they  favor  the  suppression 
of  the  Senate  and  the  President  of  the  re- 
public. The  programme  of  the  less  extreme, 
and  more  truly  representative,  group  of 
Socialists  calls  for  laws  restricting  the  hours 
of  labor  and  affecting  conditions  of  employ- 
ment. They  desire  to  transplant  the  German 
system  of  sick  funds  and  old-age  pensions, 
and  lay  the  burden  of  their  maintenance 
upon  the  State.  This  great  charge  upon  the 
budget  they  are  ready  to  provide  without 
hardship  to  themselves  by  the  imposition 
of  a  graduated  income  tax  on  the  wealthy. 
Complete  freedom  in  forming  associations 
is  desired,  laws  more  favorable  to  labor 
unions  are  wanted,  payment  to  the  holders 
of  elective  offices  advocated,  and  the  control 
by  the  state  of  the  railroads,  mines,  and 
banks  is  also  proposed.  The  Socialists  are 
almost  as  much  opposed  to  state  education 
as  they  have  been  to  clerical  instruction. 

The  Socialists'  contention  that  the  rich 
are  getting  richer  and  the  poor  are  getting 
poorer  was  pretty  effectually  disproved  re- 
cently by  the  investigation  of  the  French 
Labor  Bureau  covering  labor  conditions  in 
France  from  1840  to  the  end  of  the  century. 
During  a  period  in  which  the  population 
grew  only  12  per  cent,  the  consumption  of 
wheat  rose  60  per  cent,  of  meat  90  per  cent, 

351 


Business  and  Education 

potatoes  loo  per  cent,  sugar  500  per  cent, 
and  alcohol  260  per  cent. 

The  demands  of  the  Socialists  seem  likely 
now  to  come  into  the  foreground.  It  is 
probable  that  we  shall  see  in  France  much 
parliamentary  attention  given  to  legislation 
having  for  its  object  the  amelioration  of 
the  condition  of  the  working  people.  That 
fact  is  by  no  means  without  significance  in 
a  survey  of  commercial  conditions  in  France. 
The  questions  that  promise  to  take  a  lead- 
ing position  in  legislative  consideration  will 
involve  material  change  in  the  relations  of 
the  working  classes  to  their  employers,  and 
may  threaten  marked  alteration  of  the  ratio 
in  which  profits  are  divided  between  capital 
and  labor.  Considering  the  strength  and 
vitality  of  French  socialism,  the  future 
would  seem  to  favor  legislation  of  a  char- 
acter likely  to  affect  unfavorably  industrial 
enterprise,  at  least  until  a  process  of  read- 
justment has  been  gone  through.  French 
commerce  is  therefore  facing  unpleasant 
legislative  possibilities  in  the  way  of  income 
taxes,  old-age  pensions,  restrictions  of  the 
hours  of  work,  and  legislation  favoring  labor 
organizations. 

The  adoption  of  a  scheme  for  old-age 
pensions  and  the  imposition  of  an  income 
tax  are  now  earnestly  favored  by  the  min- 
istry. The  Finance  Minister,  M.  Rouvier, 
352 


Political  Problems  of  Europe 

who  has  proved  himself  one  of  the  most 
adroit  and  able  men  who  ever  held  the 
Treasury  portfolio,  has  formulated  a  scheme 
of  taxation  which  would  abolish  the  pres- 
ent somewhat  intricate  system,  and  replace 
it  with  two  simple  revenues  —  one  a  tax  on 
income,  and  the  other  a  tax  on  house  rent. 
The  Socialists  condemn  the  Government 
scheme,  declaring  it  not  progressive  enough. 
They  demand  a  tax  which  shall  almost 
entirely  consume  property  when  income 
reaches  a  high  level. 

The  respect  for  property  rights  is  gener- 
ally so  highly  developed  in  France  that  it 
hardly  seems  probable  that  the  Socialists, 
strong  and  growing  though  the  party  is, 
will  be  able  to  pass  legislation  of  so  radical 
a  nature  as  they  now  propose.  Should  they 
make  substantial  progress  with  their  income- 
tax  scheme,  French  business  interests  will 
have  more  reason  to  concern  themselves  with 
politics  in  the  next  few  years  than  has  been 
the  case  for  a  long  time  past. 

The  Socialist  party  in  France  has  none  of 
the  remarkable  coherence  which,  the  Social 
Democrats  of  Germany  exhibit.  The  most 
striking  feature  of  the  German  Social-Dem- 
ocratic organization  is  its  perfect  unity. 
The  individual  subordinates  his  ideas  to  the 
main  programme.  The  will  of  the  party,  as 
expressed  by  the  majority,  is  absolute  law. 

23  353 


Business  and  Education 

The  party  discipline  is  the  most  perfect  to 
be  found  in  any  poHtical  organization.  The 
French  SociaHsts,  on  the  other  hand,  are 
constantly  at  variance.  They  frequently 
break  up  into  warring  groups.  At  present 
there  are  two  groups  of  importance,  and 
five  or  six  subordinate  ones.  If  there  was 
prospect  of  the  strength  of  the  Revolutionary 
Socialists  increasing  until  they  were  able 
to  impress  their  views  upon  the  Chamber, 
the  outlook  for  French  commerce  and  in- 
dustry would  be  serious  indeed. 

The  Revolutionary  Socialists  want  no 
half-way  business  about  their  old-age  pen- 
sion system.  They  desire  that  the  pension 
shall  be  large  enough  to  insure  the  aged 
workingman  living  in  comfort,  and  they  do 
not  want  it  to  be  put  off  until  he  has  grown 
weary  waiting  for  it.  Not  only  do  they  want 
large  pensions  to  begin  before  extreme  old 
age  is  reached,  but  they  are  radically  op- 
posed to  any  contributions  from  the  wages 
of  the  working  people  to  replenish  the  pen- 
sion fund.  They  w^ant  it  all  provided  by 
the  State.  They  would  have  the  wealthy 
pay  the  pensions  instead  of  making  frugality 
a  requisite,  as  in  Germany. 

The  French  Socialists  show  a  tendency, 
however,  to  abandon  the  revolutionary  ideas 
which  have  marked  the  programmes  of  their 
more  radical  groups.     With  the  adoption  of 

354 


Political  Problems  of  Europe 

a  sober  and  more  practical  programme  they 
show  growing  strength.  In  national  politics 
they  have  reached  the  dignity  of  representa- 
tion in  the  Cabinet,  as  well  as  substantial 
power  in  the  Chamber. 

The  chief  practical  success  which  French 
socialism  has  gained  thus  far,  however,  has 
been  the  acquisition  of  municipal  power. 
Many  of  the  larger  cities  of  France  are  now 
controlled  by  Socialist  councils.  Before 
1892  the  Socialists  had  a  majority  in  only 
one  town  council  —  in  Saint  Ouen  —  but 
since  then  they  have  succeeded  in  securing 
majorities  in  ten  other  important  town 
councils,  including  such  cities  as  Lille,  Mar- 
seilles, and  Calais.  The  municipal  council 
of  Paris  has  a  Socialist  group  so  important 
as  strongly  to  influence  its  actions.  In  those 
towns  where  the  Socialists  have  a  majority 
they  frequently  pass  radical  measures  for 
the  benefit  of  the  laboring  classes,  but  those 
measures  are  always  vetoed  by  the  prefects, 
who  have  an  absolute  veto  power.  The  pre- 
fects pronounce  such  legislation  as  outside 
the  council's  jurisdiction.  In  that  way  the 
power  of  the  Socialists  in  municipal  affairs 
is  sharply  limited.  No  matter  how  radical 
may  be  the  voice  of  the  municipal  council, 
the  action  of  that  body  is  held  in  check  by 
the  centralized  system  of  government  which 
Napoleon  planned.     The  municipal  council 

355 


Business  and  Education 

may  have  a  majority  of  members  with  ever 
so  revolutionary  plans.  The  council  is  pre- 
sided over  by  a  prefect  who  represents  the 
central  Government,  and  wields  a  veto  which 
will  effectually  check  a  tendency  toward  any- 
thing which  the  officials  in  Paris  may  re- 
gard as  dangerous  enactments. 

In  Belgium  socialism  is  one  of  the  strong- 
est of  the  present  political  forces.  It  is 
natural  to  find  in  that  country  a  fertile  field 
in  which  to  spread  socialistic  doctrines,  for 
it  is  a  country  with  a  great  industrial  popu- 
lation and  a  comparatively  small  number 
who  devote  themselves  to  agriculture.  The 
greatest  energy  is  shown  there  in  the  sys- 
tematic inculcation  of  socialistic  ideas.  Not 
only  is  there  thorough  organization  in  the 
cities,  but  the  proselyting  is  pushed  out  into 
the  agricultural  districts.  On  Sundays  in 
Belgium  it  is  a  common  thing  to  see  squads 
of  bicycle  riders  passing  along  the  country 
roads  distributing  socialistic  literature  to  the 
peasants  or  waiting  outside  the  doors  of 
the  little  country  churches  to  hand  out  their 
socialist  tracts. 

In  the  cities  the  strength  of  the  socialists 
became  so  great  that  the  railroad  adminis- 
tration, which  is  in  the  hands  of  the  Gov- 
ernment, thought  to  help  the  industrial  em- 
ployers and  increase  the  supply  of  workmen 
by    organizing    a    series    of    workingmen's 

356 


Political  Problems  of  Europe 

trains.  Greatly  reduced  fares  were  put  in 
force  on  these  trains,  and  they  transported 
to  the  cities  and  to  the  industrial  centres 
great  numbers  of  workingmen  who  lived 
in  the  country  and  who  had  not  yet  taken 
up  socialist  ideas.  The  Government's  ex- 
pectation of  making  headway  against  the 
workingmen's  combinations  has  not  been 
realized.  It  has  turned  out  that  the  new 
laborers  thus  brought  to  the  cities  have 
quickly  taken  up  the  doctrines  and  ideas  of 
the  dwellers  in  the  towns,  and  the  recent 
progress  of  the  Socialist  party  has  been 
mainly  made  among  the  inhabitants  of  those 
small  villages.  Among  the  peasants,  those 
who  are  actually  workers  in  the  fields,  little 
headway  is  made  by  the  propaganda  of  the 
workingmen's  party. 

Socialism  in  Belgium  has  developed 
largely  in  the  direction  of  co-operative  en- 
terprises. In  that  particular  it  has  taken  a 
firmer  hold  in  that  country  than  elsewhere. 
Co-operative  evolution  is  already  too  far  ad- 
vanced for  any  opposition  by  the  State  to  be 
effective.  There  are  many  huge  co-operative 
organizations,  and  their  energies  are  directed 
toward  almost  every  phase  of  economic  life. 
In  the  main  they  may  be  said  to  be  success- 
ful; certainly  they  are  far  more  successful 
than  any  attempts  at  co-operation  which  we 
have  seen  in  America.    Without  doubt  their 

357 


Business  and  Education 

influence  is  beneficent.  Most  of  the  great 
co-operative  associations  have  their  own  H- 
braries,  devoted  particularly  to  economic  and 
social  science.  In  the  Vooruit,  at  Ghent,  I 
have  seen  a  collection  of  many  thousand 
volumes  devoted  to  these  two  subjects. 

There  are  nearly  two  thousand  co-opera- 
tive societies  in  Belgium,  with  a  million  con- 
sumers. Fully  one-seventh  of  the  total  pop- 
ulation belong  to  these  institutions.  They 
are  flourishing  institutions,  too,  showing 
good  management  and  important  economic 
results.  The  Maison  du  Peuple,  in  Brussels, 
is  one  of  the  most  important  of  these  co-oper- 
ative organizations.  It  is  a  sort  of  people's 
palace;  it  contains  libraries,  concert  halls, 
theatre,  and  lecture-rooms,  as  well  as  the 
co-operative  stores  for  furnishing  every  kind 
and  variety  of  supplies.  There  are  attached 
to  the  institution  doctors,  dentists,  and  ocu- 
lists. It  covers  practically  every  department 
of  life,  and  is  more  comprehensive  than  the 
greatest  of  our  own  department  stores. 
Some  of  these  institutions  administer  life- 
insurance  funds  and  sick  benefits  with 
success. 

All  the  members  of  the  workmen's  party 
are  members  of  some  co-operative  organiza- 
tion, so  that  the  co-operative  and  the  polit- 
ical movements  have  gone  hand  in  hand. 
In  the  small  villages  the  first  co-operative 

358 


Political  Problems  of  Europe 

establishment  is  generally  a  bakery,  and  this 
becomes  the  nucleus  of  a  large  co-operative 
industrial  company  later.  There  is  success- 
ful co-operation,  too,  in  the  purely  agricul- 
tural communities,  in  the  form  of  associa- 
tions for  buying  supplies  and  for  selling  the 
produce  of  the  farms.  The  farmers  believe 
that  a  central  control  over  the  marketing  of 
their  products  has  greatly  increased  their 
income.  It  has  tended  to  eliminate  unnec- 
essary competition  and  to  better  adapt  the 
supply  to  the  demand. 

The  Socialist  party  in  Belgium  now  has 
over  five  hundred  thousand  votes,  and,  con- 
sidering its  relations  to  the  co-operative  es- 
tablishments, probably  controls  a  larger 
amount  of  capital  than  any  other  political 
party.  Its  struggle  and  agitation  for  univer- 
sal suffrage  has  been  its  most  important 
undertaking.  Dangerous  weapons  were 
used.  I  can  imagine  few  graver  prospects 
than  the  possibility  of  the  introduction  of 
similar  methods  of  warfare  into  our  politi- 
cal life.  As  a  climax  in  the  effort  to  obtain 
universal  suffrage,  there  was  an  attempt 
made  to  bring  about  a  universal  strike  in 
every  industry,  with  the  hope  that  there 
would  be  such  complete  paralysis  of  the  na- 
tion's industrial  life  that  the  Government 
would  be  compelled  to  yield.  The  attempt 
was  a  failure,  but  the  method  was  a  most 

359 


Business  and  Education 

dangerous  precedent.  The  strike  will  be 
remembered  as  probably  the  greatest  one  on 
record.  More  than  300,000  workingmen 
were  idle.  Nearly  every  industry  in  the 
country,  with  the  exception  of  the  railroads, 
post-offices,  and  telegraph  lines,  was  affected. 
The  strike  was  marked  by  comparatively 
little  disorder.  In  spite  of  the  imposing 
manifestation  on  the  part  of  the  people,  the 
Government  succeeded  in  maintaining  its 
majority,  and  the  Chamber,  by  a  majority 
of  20,  refused  to  consider  the  question  of 
revising  the  constitution  in  favor  of  univer- 
sal suffrage.  The  election  which  followed 
strengthened  slightly  the  workingmen's 
party,  but  also  strengthened  the  Clericals, 
who  are  at  present  the  controlling  force  back 
of  the  ministry.  The  Chamber  is  made  up 
of  166  members.  The  Clericals  now  have 
96,  the  Socialists  35,  and  the  Liberals  34. 

The  union  of  political  and  labor  organi- 
zations is  seen  in  the  highest  development 
in  Belgium,  and  the  result  of  that  union, 
with  its  possibility  of  strictly  class  legisla- 
tion, may  well  be  to  us  an  interesting  field  of 
observation.  As  yet  it  has  not  seriously 
affected  industry,  nor  threatened  existing 
forms  of  government,  but  if  the  great  indus- 
trial population  of  Belgium  is  eventually 
united  into  a  political  organization  of  suffi- 
cient strength  to  take  the  control  of  the 
360 


Political  Problems  of  Europe 

Government  out  of  the  hands  of  the  Cler- 
icals, Belgium  is  likely  to  become  the  scene 
of  extremely  interesting  socialistic  legisla- 
tion. 

A  phase  of  socialism  which  is  especially 
emphasized  in  Belgium  is  the  attitude  of 
the  party  toward  art,  and  the  plans  for  pro- 
viding culture  and  amusement  for  the  peo- 
ple, in  answer  to  a  demand  for  public  en- 
tertainments and  for  great  spectacles.  In 
a  state  in  which  they  hope  to  abolish  the 
Church  and  the  army,  they  propose  to  have 
something  to  substitute  for  churchly  pomp 
and  military  pageant.  They  expect  to  do 
this  by  parades  and  celebrations  of  one  kind 
and  another,  and  even  now  they  work  out 
the  details  of  these  in  a  most  artistic  and 
thorough  way,  modelling  them  largely  on 
the  magnificent  festivals  of  the  Belgium 
cities  in  the  Middle  Ages.  A  harvest  festi- 
val which  I  recently  saw  in  Bruges  was  an 
elaborate  and  artistic  example.  A  proces- 
sion with  floats  representing  different  grains 
and  different  phases  of  the  harvest  certainly 
made  in  the  way  of  public  amusement  a 
good  substitute  for  a  spectacle  on  the 
Champs  de  Mars. 

The  Belgian  Socialists  ask  of  the  Govern- 
ment that  so  far  as  possible  it  cultivate  the 
artistic  in  all  phases  of  public  life,  and  that 
the  strength  of  the  State  be  directed  to  ob- 
361 


Business  and  Education 

literate  all  ugly  and  unpleasant  sights.  Of 
the  Minister  of  Finance  is  demanded  money 
of  more  artistic  appearance,  modelled  closely 
on  the  lines  of  antique  coins.  From  the 
Minister  of  Railroads  they  wish  stations  of 
architectural  excellence,  decorated  by  the 
greatest  of  contemporary  artists,  and  rail- 
way carriages  where  comfort  is  combined 
with  the  consideration  of  what  is  beautiful. 
They  even  ask  for  less  commonplace  rail- 
road tickets.  From  the  Minister  of  Agri- 
culture are  demanded  comprehensive  plans 
for  the  preservation  of  the  trees  along  the 
great  national  roads ;  and  from  the  Minister 
of  Industry,  the  reorganization,  improve- 
ment, and  vitalizing  of  the  provincial  schools 
for  teaching  industrial  art,  the  creation  of 
museums  and  galleries,  and  generally  the 
provision  of  the  means  for  higher  artistic 
culture. 

Thus  the  Belgium  Socialists  by  no  means 
propose  to  confine  their  ambitions  to  the  im- 
provement of  material  conditions.  In  some 
respects  they  may  have  impractical  ideals, 
but  on  the  whole  their  programme  is  one 
which  must  inevitably  work  toward  the  up- 
lifting and  better  living  of  the  dense  indus- 
trial population.  Undoubtedly  they  scatter 
and  weaken  their  force  by  the  breadth  of 
their  demands.  Their  programme,  how- 
ever, is  interesting,  both  from  the  fact  that 
362 


Political  Problems  of  Europe 

it  illustrates  the  nature  of  what  we  would 
regard  as  fundamental  political  rights  for 
which  they  are  still  struggling,  and  illumi- 
nates some  of  the  high  ideals  with  which  the 
party  is  imbued. 

In  politics  they  desire  universal  suffrage, 
decentralization  of  the  legislative  power, 
communal  autonomy,  the  right  of  initiative 
and  referendum,  educational  reform,  the 
suppression  of  the  Church  and  army,  civil 
equality  of  the  sexes  and  suppression  of 
hereditary  functions,  and  finally  the  estab- 
lishment of  a  republic.  In  economic  mat- 
ters they  have  a  great  programme  of  public 
charity  in  the  shape  of  general  insurance 
for  all  citizens.  They  favor  the  abolition 
of  all  laws  against  coalition.  They  de- 
sire free  agricultural  education,  insurance 
against  the  diseases  of  plants  and  animals, 
and  against  the  damages  of  storms  and 
floods,  the  suppression  of  the  hunting  pre- 
serves, and  the  establishment  of  the  right 
to  destroy  during  every  season  animals  which 
do  harm  to  the  crops. 

In  the  Belgium  elections  all  the  influence 
of  the  priests  and  of  the  owners  of  land  is 
exercised  against  the  Socialists.  The  cred- 
ulity of  the  country  folk  leads  them  to  accept 
from  priests  some  remarkable  interpreta- 
tions of  socialistic  aims,  and  a  common  con- 
servatism in  the  country  results  in  advanced 

363 


Business  and  Education 

ideas  taking  root  very  slowly.  The  work- 
ingmen's  party  in  Belgium  strongly  favors 
woman's  suffrage.  The  organization  of 
Belgium  women  into  unions  of  political 
societies  has  not,  however,  made  much 
progress. 

In  Austria,  where  the  conditions  of  suf- 
frage are  unfavorable  to  Socialists,  they 
have  returned  only  ii  members  to  the 
Reichsrat.  Although  the  party  shows  a 
total  strength  of  nearly  1,000,000  votes,  the 
class  system  of  voting  gives  it  small  repre- 
sentation. The  recognized  party  organiza- 
tion has  expelled  the  extreme  revolutionists, 
and  has  taken  up  the  interests  of  the  peas- 
antry. As  a  natural  sequence  the  party  has 
become  anti-Semitic,  as  the  Jews  are  the 
great  landowners  of  the  country.  It  has 
been  said  that  two  Jews  own  a  quarter  of 
the  agricultural  land  of  Hungary,  a  state- 
ment which  is  hardly  within  the  facts.  The 
Rothschilds  are  said  to  own  one-third  of  the 
farming  land  of  Bohemia,  which  is  perhaps 
another  exaggeration.  But  in  any  event  such 
accumulation  of  enormous  tracts  of  land  has 
led  the  Socialist  party  to  take  a  strong  anti- 
Semitic  position.  The  agrarian  interests  are 
naturally  violently  opposed  to  the  Socialist 
doctrines.  They  have  secured  legislation 
authorizing  employers  to  dismiss  without 
wages  any  workingman  suspected  of  being 

364 


Political  Problems  of  Europe 

a  Socialist  agitator,  and  are  not  above  seek- 
ing any  unfair  advantage  in  combating  what 
they  regard  as  a  national  danger. 

Socialism  is  an  unimportant  element  in 
the  politics  of  Holland,  although  so  far  as  it 
does  manifest  itself  it  is  revolutionary  in 
character.  In  recent  municipal  elections  the 
Socialists  met  with  losses.  They  have  prac- 
tically no  influence  in  national  politics  there. 

In  Sweden  there  is  only  one  Socialist 
member  of  Parliament,  and  in  Switzerland 
there  is  also  one.  Although  socialism  has 
shown  no  vitality  in  the  Scandinavian 
countries,  there  has  been  a  great  develop- 
ment of  co-operative  enterprise  there.  This 
is  true  particularly  of  Denmark's  dairy  in- 
terests. The  first  of  the  Danish  co-opera- 
tive dairies  was  started  about  a  score  of 
years  ago.  They  have  been  so  well  managed 
and  produced  such  satisfactory  results,  that 
four-fifths  of  the  dairy  interests  of  the 
country  are  now  handled  by  co-operative 
organizations,  and  the  exports  of  Danish 
butter  have  grown  in  value  from  $5,000,000 
to  more  than  $30,000,000.  Co-operative 
organization  has  been  extended  with  great 
success  to  other  agricultural  interests.  There 
are  co-operative  meat-packing  concerns  with 
65,000  members  that  have  shown  good  re- 
sults. Success  has  also  attended  the  hand- 
ling of  poultry  and  other  farm  prcduce.    The 

365 


Business  and  Education 

great  development  of  Denmark's  export 
trade  in  agricultural  produce  and  the  ex- 
ceptional favor  and  high  prices  those  prod- 
ucts command  in  the  English  markets  are 
held  to  be  in  large  measure  an  indication  of 
the  advantages  of  co-operation. 

Italian  Socialists  show  considerable  po- 
litical vitality,  and  the  revolutionary  phase 
is  emphasized  there.  The  party  demands 
universal  suffrage  for  adults  of  both  sexes; 
greater  freedom  of  organization,  of  public 
meetings,  and  of  combination;  religious 
equality;  a  national  militia  in  place  of  the 
standing  army;  neutrality  of  the  govern- 
ment in  disputes  between  capital  and  labor; 
a  more  humane  penal  code;  the  nationali- 
zation of  railroads  and  mines ;  effective  com- 
pulsory education;  old-age  pensions;  the 
establishment  of  a  ministry  of  labor,  and 
the  payment  of  deputies  and  members  of 
local  councils.  The  Italian  Socialists  have 
shown  a  pretty  steady  growth  in  the  last 
decade.  Their  programme  in  the  main  is 
such  that  ordinarily  progressive  govern- 
ment and  a  fair  measure  of  political  rights 
would  satisfy  most  of  the  demands  of  the 
party. 

In  England  there  are  but  two  Socialist 
members  of  Parliament,  and  one  of  them, 
John  Burns,  is  hardly  considered  a  Social- 
ist by  the  members  of  the  party.  In  spite 
366 


Political  Problems  of  Europe 

of  that  there  is  to  be  found  in  England  an 
impressive  manifestation  of  socialistic  tend- 
encies. Its  development  is  in  connection 
with  the  municipal  ownership  of  public 
utilities.  What  is  called  ^'  gas  and  water 
socialism "  has  generally  been  the  begin- 
ning of  these  municipal  enterprises.  There 
are  some  successes  and  a  great  many  fail- 
ures. In  England  human  nature  is  not 
greatly  different  from  human  nature  as 
found  elsewhere,  and  municipal  counsellors 
are,  as  a  usual  thing,  demonstrated  to  be 
none  too  well  fitted  for  the  conduct  of  the 
huge  industrial  enterprises  which  many  of 
the  municipalities  have  undertaken.  There 
has  been  an  astonishing  increase  in  muni- 
cipal indebtedness  following  in  the  wake  of 
these  industrial  undertakings.  The  mu- 
nicipal expenditures  for  industrial  under- 
takings have  resulted  in  the  raising  of  the 
tax  rate  to  such  a  point  as  to  cause  a  whole- 
sale exodus  of  tax-payers  from  some  muni- 
cipal districts. 

The  labor  vote  in  England  frequently 
unites  solidly  in  favor  of  its  candidates  for 
municipal  office,  and  sometimes  with  curi- 
ous results.  Two  labor  leaders  were  re- 
cently elected  to  the  town  council  of  Bat- 
tersea,  for  example,  and  shortly  after  their 
election,  having  used  their  political  influ- 
ence to  secure  jobs  as  street-sweepers  at  27 

367 


Business  and  Education 

shillings  a  week,  they  resigned  their  politi- 
cal office. 

More  or  less  important  as  is  the  Socialist 
movement  in  those  countries  already  re- 
ferred to,  it  is  in  Germany  that  we  find  it 
developed  to  a  commanding  political  posi- 
tion. It  is,  perhaps,  hardly  fair  to  call 
the  Social-Democratic  party  of  Germany 
as  it  now  exists  strictly  a  party  of  Social- 
ists, for  there  are  many  members  of  it  who 
elsewhere  would  be  known  as  Liberals.  It 
is  true  the  platform  of  the  Social-Demo- 
cratic party  was  originally  the  communistic 
manifestos  of  Carl  Marx  and  Frederick 
Engels,  and  at  first  the  party  held  that  the 
emancipation  of  labor  demanded  the  trans- 
fer of  raw  material  to  the  common  posses- 
sion of  society,  and  that  only  the  best 
results  and  the  just  distribution  of  the 
products  of  labor  could  be  obtained  by  the 
communistic  regulation  of  collective  labor. 
Thirty  years  ago,  under  the  direction  of 
Liebknecht  and  Bebel,  the  party  united  to 
itself  the  labor  unions  and  organizations  of 
various  sorts,  and  became  a  party  of  polit- 
ical importance.  The  growth  of  the  Social 
Democrats  in  Germany  has  been  coincident 
with  the  growth  of  industrialism.  It  is  the 
party  of  labor  and  of  protest.  Its  most 
violent  opponents  are  the  agrarians,  whose 
lands  have  been  stripped  of  cheap  laborers 
368 


Political  Problems  of  Europe 

by  the  development  of  industrialism  in  the 
cities.  The  party  has  thrived  under  perse- 
cution. It  steadily  gained  votes  in  the  face 
of  the  most  antagonistic  laws  which  the  Jun- 
kers could  devise  with  Bismarck's  aid,  and 
the  most  harassing  police  espionage  which 
the  bureaucratic  system  of  Government  has 
made  possible. 

In  the  last  German  election  nearly  one- 
third  of  the  9,500,000  votes  were  polled  for 
the  Social-Democratic  candidates.  The  re- 
sult of  that  election  shows  a  loss  of  nearly 
30  per  cent  by  the  agrarian  groups,  and  a 
gain  of  43  per  cent  by  the  Social  Demo- 
crats. It  was  the  sort  of  thing  that  we  call, 
in  our  politics,  a  landslide.  Every  session 
of  the  Reichstag  for  eighteen  years,  how- 
ever, has  shown  an  increasing  number  of 
seats  occupied  by  the  Social  Democrats,  so 
that  the  great  gains  of  the  last  election  did 
not  indicate  a  turning  over  of  public  senti- 
ment. It  rather  represented  a  culmination 
of  those  influences  which  have  been  adding 
strength  to  the  Social-Democratic  party 
ever  since  the  first  session  of  the  Reichstag 
in  1 87 1,  when  only  one  Social  Democrat 
sat  on  the  extreme  left. 

The   Social   Democrats  now  poll   a   ma~ 

jority  of  votes  in  nearly  every  capital  city, 

every  great  mercantile  marine  port,  and  in 

all  the  great  industrial  centres.     They  are 

24  369 


Business  and  Education 

handicapped  by  unfair  representation.  If 
the  true  expression  of  the  will  of  the  Ger- 
man people  were  reflected  in  the  Reichstag 
the  Social  Democrats  would  be  in  a  com- 
manding position  there. 

In  studying  German  politics,  however,  it 
must  be  borne  in  mind  that  the  ministry  is 
not  responsible  to  the  Reichstag,  but  only  to 
the  Emperor.  No  cabinet  resignations  or 
dissolution  of  Parliament  follows  a  vote  un- 
favorable to  the  Government.  The  Reich- 
stag has  little  more  than  a  veto  power, 
and  the  people  are  hampered  in  the  expres- 
sion of  even  that  veto  privilege  by  the 
greatest  inequalities  in  the  electoral  divi- 
sions of  the  empire.  The  election  law 
originally  provided  that  there  should  be 
one  member  of  the  Reichstag  for,  generally 
speaking,  every  100,000  inhabitants,  but 
did  not  provide  for  fair  readjustment  in 
case  of  increasing  or  shifting  population. 
Since  that  law  was  passed,  the  populaton 
has  increased  from  40,000,000  to  58,000,- 
000,  but  there  has  been  no  rearrangement  of 
electoral  divisions.  There  is  one  member  of 
the  Reichstag  who  represents  183,076  votes, 
and  another  who  represents  only  9,551. 

The  increase  in  population  has  been  in  the 
cities,  and  it  is  from  the  cities  that  the  Social 
Democrats  draw  their  main  strength.  The 
unfairness    and    inequality    of    the    present 

370 


Political  Problems  of  Europe 

electoral  arrangement,  therefore,  falls  with 
greatest  force  upon  the  Social  Democrats, 
and  reacts  to  the  greatest  advantage  of  the 
agrarians  and  Clericals.  Those  groups, 
forming,  as  they  do,  the  Government  ma- 
jority, and  being  the  beneficiaries  of  the 
present  inequalities  in  the  electoral  distribu- 
tion, are  unwilling  to  concede  the  slightest 
change.  They  dread  the  ascendancy  of  the 
Social  Democrats  as  some  great  national 
calamity,  and  they  offer  their  fears  as  their 
excuse  for  manifest  unfairness. 

Although  the  Social  Democrats  polled 
3,010,000  votes,  or  32  per  cent  of  the  total, 
they  have  only  81  seats  in  the  Reichstag, 
v^hich  is  composed  of  397  members.  The 
Centre,  with  a  popular  vote  of  1,850,000, 
has  100  seats  in  the  Reichstag.  If  there 
had  been  fair  representation  and  an  equal 
distribution  of  political  rights  the  Social 
Democrats  would  have  125  members  and 
would  have  been  the  strongest  group  in  the 
Chamber.  Berlin  has  6  members  of  the 
Reichstag,  but  on  a  fair  plan  of  distribution 
would  have  20. 

The  unfairness  of  the  electoral  distribu- 
tion in  the  empire  is  even  more  marked  in 
some  of  the  states  of  which  the  empire  is 
formed.  In  the  Prussian  Diet  there  is,  for 
example,  not  only  the  same  inequalities  in 
the  size  of  the  constituencies,  but  there  is  a 

371 


Busmess  and  Education 

unique  plutocratic  system  of  voting  by  class 
according  to  the  amount  of  taxes  paid.  The 
city  of  Berlin  now  has  9  members  in  the 
Diet,  but  would  have,  on  an  equitable  basis 
of  population,  25.  The  system  of  voting  by 
classes  is  peculiar,  and  must  strike  those  of 
us  who  love  political  equality  as  most  un- 
fortunate. The  system  is  this :  In  each  elec- 
tion precinct  the  voters  are  divided  into 
three  equal  classes,  on  a  basis  of  the  amount 
of  taxes  paid.  These  electors  form  a  little 
electoral  college,  choosing  the  member  or 
members  of  the  Diet.  Here  is  a  specific  il- 
lustration of  how  this  system  works  out: 
In  a  certain  district  of  Berlin,  which  in- 
cludes a  part  of  the  Wilhelmstrasse,  the  first 
class  has  in  it  3  voters,  the  second  class  8, 
and  the  third  class  294.  The  ballots  of  the 
three  voters  in  the  first  class  thus  have  the 
same  political  weight  as  the  ballots  of  the 
294  in  the  third  class,  because  the  first  class 
pays  the  same  amount  of  taxes  as  the  third 
class.  But  the  particularly  amusing  feature 
here  is  that  this  third  class  of  294  includes 
Count  von  Biilow  and  other  Cabinet  mini- 
sters, and  many  high  Government  officials. 

Under  this  system  there  is  not  only  in- 
equality of  political  rights  within  a  district, 
based  on  the  tax  contribution  of  the  voter, 
but  it  results  in  most  absurd  inequality  in 
the  political  rights  of  one  district  as  against 

372 


Political  Problems  of  Europe 

another.  In  some  districts  of  Berlin,  for 
instance,  a  man  must  pay  150,000  marks  in 
taxes  in  order  to  vote  in  the  first  class;  in 
other  districts  a  payment  of  taxes  to  the 
amount  of  36  marks  puts  the  voter  into  the 
first  class.  Bismarck  called  the  Prussian 
method  "  the  most  miserable  of  all  electoral 
systems,"  but  the  Government  shows  no 
growing  disposition  to  change  it.  Herr  von 
Hammerstein  recently  said,  '*  No  other  elec- 
toral system  gives  such  a  correct  impression 
of  public  opinion  as  our  tripartite  system  in 
Prussia." 

What  is  it  that  caused  such  remarkable 
growth  of  the  Social-Democratic  party? 
What  are  the  complaints  of  the  German 
people?  What  measures  do  the  Social 
Democrats  purpose?  Does  this  party  of 
protest  and  discontent,  growing  as  it  has  the 
most  rapidly  of  any  political  party  in  Eu- 
rope, foreshadow  changes  which  will  have  a 
momentous  effect  on  industrial  conditions? 
Those  are  all  questions,  the  answers  to 
which  seem  to  me  of  direct  interest  to  us. 

The  point  of  view  of  the  Social  Demo- 
crats, without  doubt,  rests  in  large  measure 
on  a  sound  appreciation  of  economic  facts. 
They  have  seen  at  close  range  the  effect  of 
modern  economic  development.  They  have 
noted  the  substitution  of  machinery  for  hand 
labor  and  the  stifling  of  small  industries  by 

373 


Business  and  Education 

great  and  more  efficient  industrial  combina- 
tions. They  offer  no  plan  to  oppose  such 
development.  They  recognize  that  it  is  in 
the  line  of  economic  evolution.  But  they 
are  convinced  that  it  has  deprived,  and  will 
continue  to  deprive  in  an  increasing  degree, 
the  individual  worker  of  the  means  of  inde- 
pendent production.  The  result,  they  be- 
lieve, is  the  creation  of  a  new  social  order, 
and  there  must  in  time  be  a  readjustment  of 
economic  conditions  to  meet  the  change. 
There  is  no  disposition  violently  to  over- 
throw existing  conditions. 

A  natural  deduction  from  the  growth  of 
the  Social-Democratic  party  might  be  that 
such  growth  indicates  a  tendency  toward 
revolution,  and  that  with  increasing  power 
and  confidence  it  may  become  a  movement 
to  overthrow  the  Government.  Probably 
nothing  could  be  further  from  the  future 
course  of  events. 

The  principles  for  which  the  Social  Demo- 
crats stand  are  the  sort  that  naturally  thrive 
in  the  German  character.  The  German  is 
supercritical.  He  delights  in  national  fault- 
finding. He  takes  naturally  and  kindly  to 
a  party  of  opposition.  He  is  devoted  to 
speculative  philosophy,  and  the  dreams  of 
the  classical  socialist  writers  appeal  to  him. 
His  phrenological  bump  of  the  ideal  is 
highly  developed,   and  political  ideals   that 

374 


Political  Problems  of  Europe 

would  in  other  countries  be  regarded  as  im- 
practical dreams  are  in  Germany  the  sort  of 
thing  around  which  a  party  can  be  built,  and 
a  party,  too,  which  will  submit  to  the  most 
rigid  and  practical  party  discipline  —  the 
sort  of  discipline  that  every  German  has 
learned  to  know  the  value  of  in  his  army 
training. 

Not  alone  is  the  German  character  the  sort 
which  would  encourage  the  growth  of  so- 
cialism, but  German  political  conditions, 
which  were  inherent  in  the  varied  political 
development  of  those  countries  which  were 
forged  together  into  the  German  Empire, 
have  been  such  as  must  inevitably  have 
united  into  a  party  of  opposition  men  who 
had  ideals  of  true  liberty.  The  German 
states  were  securely  bound  together  when 
the  empire  was  agreed  to,  but  they  were  not 
amalgamated.  They  remained  states  whose 
political  development  covered  the  whole 
range  from  actual  feudalism  to  those  re- 
publican cities  with  well-developed  consti- 
tutional government.  Even  in  dominating 
Prussia  constitutionalism  was  only  skin 
deep;  the  real  government  was  junkerism 
and  militarism.  The  Junkers  are  slow  to 
give  up  their  traditions  of  feudal  authority. 
Their  deep-seated  conviction  to-day  is  that 
they  should  rule  by  authority  not  by  ma- 
jority.    There  is  many  a  Junker  aristocrat 

375 


Business  and  Education 

who  believes  as  devoutly  in  his  divine  right 
to  stand  in  a  position  of  authority  toward 
his  humbler,  though  perhaps  wealthier  fel- 
low citizens,  as  does  the  Emperor  himself. 

Few  nations  have  had  a  more  trying  task 
than  Germany  has  had  in  disentangling  the 
confused  political  rights  as  found  in  the  gov- 
ernmental institutions  of  the  various  states, 
in  reducing  to  proper  proportions  the  dual 
powers  of  state  diets  and  Imperial  Reichs- 
tag. Popular  repn-esentation  at  first  had 
little  meaning.  Part  of  the  work  which  the 
Socialists  set  out  to  do  was  to  develop  it. 
Tangible  form  was  to  be  given  to  those  con- 
stitutional provisions  defining  the  rights  of 
the  people,  and  a  party  with  something  more 
than  Junker  agrarianism  or  clerical  conserv- 
atism in  its  programme  was  needed.  The 
Social  Democrats  took  that  as  their  work. 
The  development  of  true  liberty  demanded 
the  abolishing  of  caste  and  the  undermining 
of  class  privileges.  Nothing  could  be  more 
to  the  taste  of  those  men  who  directed  the 
Socialist  movement.  The  Socialists  believe 
that  the  political  task  which  they  have  to 
accomplish  is  the  development  of  a  living 
constitution  and  the  impression  of  modern 
ideas  of  freedom  on  Government  and 
Reichstag. 

They  have  grown  to  be  a  party  with  over 
three  million  votes,  but  they  feel  they  have 

376 


Political  Problems  of  Europe 

as  yet  accomplished  small  part  of  their  work. 
They  have  seen  the  empire  become  a  great 
political  and  commercial  power,  but  there 
has  been  little  progress  toward  individual 
freedom  and  equality.  They  declare  that 
constitutional  government,  as  found  in  Ger- 
many, is  a  semblance  and  a  pretence,  not  a 
reality,  and  they  are  largely  right.  The 
Reichstag  is  not  truly  representative,  and  if 
it  were  it  would  still  be  without  authority. 
The  Emperor,  the  army,  the  aristocrats,  the 
bureaucracy,  and  the  police  govern  Ger- 
many. The  vote  of  a  citizen  has  less  direct 
influence  than  in  any  other  country  with  a 
constitutional  government. 

The  power  of  the  police  is  especially  ob- 
noxious to  the  German  Socialists.  It  is 
true  that  the  police  do  interfere  in  about 
every  relation  of  life,  and  while  from  one 
point  of  view  the  result  is  the  most  orderly 
government  in  the  world,  there  is  ample 
ground  for  irritation  at  the  nature  of  the 
espionage.  Nowhere  else,  not  even  in  Rus- 
sia, do  the  police  so  completely  constitute 
themselves  the  guardians  of  the  public. 
There  is  complaint,  too,  against  the  tend- 
ency to  give  the  widest  possible  interpreta- 
tion to  the  penal  code,  to  make  every  con- 
ceivable action  liable  to  punishment,  to  re- 
strict the  freedom  of  meetings,  of  public 
speech,  and  of  the  press,  and  to  invoke  the 

377 


Business  and  Education 

laws  of  lese-majesty  in  a  way  that  is  re- 
garded as  barbarous  and  intolerable. 

So  much  for  the  general  grounds  upon 
which  may  stand  a  party  of  protest.  There 
is  one  specific  grievance,  however,  which 
has  had  more  influence  in  building  up  the 
Social-Democratic  party  than  almost  all 
other  factors  together.  The  question  of 
dear  food  or  cheap  food  makes  an  issue 
that  is  easily  comprehended.  The  natural 
political  enemies  of  the  Socialists,  the  Junk- 
ers, want  nothing  in  politics  more  than  high 
protective  duties  on  agricultural  produce, 
for  that  is  all  there  is  between  the  agrarians 
and  ruinous  competition  with  the  fields  of 
America.  The  industrial  population,  of 
course,  wants  cheap  food,  and  so  the  issue 
is  clearly  drawn.  Their  war-cry  is  the 
epithet  of  "  bread  usurer."  Their  argu- 
ments, from  the  industrial  point  of  view 
alone,  are  unanswerable.  Germany  has  the 
dearest  meats  and  dearest  wheat  of  any 
country  in  the  world.  Converts  are  plenti- 
ful when  a  campaign  is  made  to  centre  about 
the  easily  understood  phrase  of  cheap  food. 

It  is  natural  to  find  the  Socialists  opposed 
to  the  great  expenditures  on  army  and  navy. 
They  are  not  so  much  opposed  to  the  army 
as  to  the  vast  sums  which  the  Kaiser  pours 
into  the  building  of  a  navy.  They  know 
that  the  navy  is  built  from  customs  dues. 

378 


Political  Problems  of  Europe 

They  know  that  the  taxes  on  cereals  and 
coffee  provide  ahnost  half  of  the  customs 
receipts,  and  they  feel  that  the  Government 
unjustly  taxes  the  necessities  of  life  in  such 
a  way  that  the  poor  contribute  to  the  de- 
fence of  the  country  practically  as  much 
per  man  as  do  the  well-to-do  and  the  rich. 
The  new  tariff,  raising  the  duty  on  wheat 
and  rye  from  33  to  55  marks,  has  not 
softened  their  bitterness.  If  this  new  cus- 
toms law  comes  fully  into  force,  they  be- 
lieve they  will  lose  as  much  in  that  single 
blow  as  they  gained  by  the  passing  of  all 
the  old-age  pension  laws  which  they  secured 
after  years  of  struggle.  The  Socialists' 
complaint  against  the  army  is  not  directed 
toward  military  service,  but  against  the 
system  under  which  the  army  is  officered 
only  by  aristocrats,  and  remains  the  least 
democratic  of  all  German  institutions,  al- 
though every  German  gives  part  of  his  life 
to  it. 

Here  is  the  programme  of  the  German 
Socialists  as  formulated  by  the  more  moder- 
ate members  of  the  party.  They  pronounce 
for  the  maintenance  of  constitutional  guar- 
antees, and  would  give  real  form  and  sub- 
stance to  the  constitutional  rights  of  the 
individual.  They  aim  at  the  establishment 
of  a  sound  financial  system,  with  a  view  to 
free  and  unfettered  economical  development 
379 


Business  and  Education 

and  the  free  interchange  of  commodities  be- 
tween nations.  They  desire  the  maintenance 
of  peace,  a  just  system  of  parHamentary 
representation  and  responsibiHty  of  the 
Ministers  to  the  Reichstag,  a  fair  division 
of  the  burdens  of  taxation  by  means  of  a 
progressive  income  tax,  the  making  of 
proper  commercial  treaties,  the  administra- 
tion of  justice  in  criminal  courts  in  a  more 
humane  spirit,  reduction  in  the  period  of 
military  service,  and  the  limitation  of  mili- 
tary expenditure.  All  this  does  not  seem 
very  revolutionary  in  character,  nor  likely 
to  result  in  serious  harm  to  the  German 
nation. 

The  Social  Democracy  has  been  wonder- 
fully fortunate  in  the  devotion  and  pure 
motives  of  its  leaders.  One  sometimes  hears 
the  influence  of  August  Bebel  likened  to 
that  of  the  Pope  in  the  extent  to  which  he 
requires  and  wins  the  fidelity  and  obedience 
of  radical  elements  noted  in  other  countries 
for  diversity  of  views  and  for  restlessness 
under  restraint.  This  great  man  ought  not 
to  be  judged  alone  by  his  utterances  in  pub- 
lic speeches.  He  has  an  oratorical  passion 
that  sometimes  goes  far  beyond  his  generally 
cool  judgment  and  moderate  views.  Herr 
Bebel  even  in  the  opinion  of  the  court  is,  I 
believe,  first  a  lover  of  Germany,  and  second 
an  implacable  enemy  of  privilege  and  hum- 
380 


Political  Problems  of  Europe 

bug.  He  has  a  vast  talent  for  organization 
and  for  the  selection  and  phrasing  of  issues. 
The  millions  of  the  poor  behind  him  believe, 
and  doubtless,  justly,  that  his  courage  and 
discriminating  devotion  to  them  is  without 
bounds. 

One  thing  especially  stands  out  in  regard 
to  the  German  Socialist  party,  and  that  is 
its  absolute  unity.  The  discipline  of  the 
party  is  magnificent.  A  most  striking  ex- 
ample of  this  was  the  way  in  which  Bern- 
stein accepted  the  vote  directed  against  him 
by  the  majority  of  the  general  Congress  of 
Liibeck,  and  declared  himself  to  be  willing 
to  follow,  under  all  circumstances,  the  wishes 
of  the  majority  of  the  party.  Shortly  after 
this,  Bernstein  was  chosen  by  the  Socialists 
as  their  candidate  for  election  from  a  certain 
district  to  the  Reichstag,  whereupon  the  en- 
tire party  in  that  district,  including  some  of 
those  who  had  been  most  violently  opposed 
to  him  in  the  Congress,  voted  loyally  for 
him  and  secured  his  election. 

There  have  only  been  two  cases  in  twenty- 
seven  years  where  there  has  been  such  a 
split  in  the  Socialist  party  of  any  district 
that  they  have  put  up  two  candidates  for 
the  same  election. 

The  decisions  of  the  general  congress  of 
the  party  are  final,  but  the  delegates  have 
been  careful  to  limit  these  decisions  chiefly 

381 


Business  and  Education 

to  matters  of  principle.  Local  organiza- 
tions in  the  different  states  have  a  great 
deal  of  freedom  in  regard  to  deciding  their 
own  questions. 

During  the  last  seven  or  eight  years  the 
co-operative  movement  and  the  movement 
for  the  formation  of  workmen's  syndicates 
have  grown  rapidly  in  Germany,  and  have 
made  great  headway  among  the  Socialists 
themselves.  It  is  the  same  active  working 
class  that  composes  the  Socialist  party,  the 
Syndicates,  and  the  Workmen's  Co-operative 
Societies,  and  these  organizations  will  be  of 
the  greatest  help  to  the  Socialists  in  their 
future  conflicts. 

Although  the  Social  Democrats  form  the 
party  of  the  workingmen,  they  do  not  select 
workingmen  as  their  representatives  in  the 
Reichstag.  More  than  half  of  the  repre- 
sentatives of  that  party  are  editors,  and  prac- 
tically none  are  actually  industrial  workers. 

There  is  a  phase  of  human  nature  which 
one  encounters  in  Germany  which  has  a 
marked  influence  upon  political  development 
there.  It  is  "  unfashionable  "  to  be  out  of 
accord  with  the  Government  policy.  In  Eng- 
land a  man  may  be  a  "  Free  Trader  "  or  a 
"  Protectionist,"  a  "  Little  Englander  "  or  a 
dreamer  of  imperialistic  dreams,  without 
affecting  his  social  status  one  way  or  an- 
other. In  France  the  whole  business  of 
382 


Political  Problems  of  Europe 

politics  is  rather  outside  the  highest  social 
Hfe  and  society  concerns  itself  little  with  the 
shades  of  a  man's  political  opinion.  But  in 
Germany  all  that  is  different.  It  is  distinctly 
unfashionable,  in  the  view  of  the  best  so- 
ciety, to  hold  opinions  antagonistic  to  the 
Government,  and  the  weight  of  that  fact  is 
tremendous  in  the  shaping  of  men's  opin- 
ions. The  young  man  of  good  family  who 
finds  that  with  the  adoption  of  radical  politi- 
cal ideas  he  meets  with  distinct  coolness  in 
the  homes  of  his  friends,  that  his  name  is 
dropped  from  dinner  lists,  and  his  social 
acquaintances  regard  him  with  disfavor, 
needs  a  great  deal  of  courage  to  pursue  that 
line  of  thought.  The  power  of  social  opin- 
ion, as  represented  in  aristocratic  society,  is 
perhaps  nowhere  more  potent  in  political 
matters  than  in  Berlin. 

The  tremendous  increase  in  the  vote  of 
the  Social  Democrats  in  Germany,  while  it 
has  failed  to  give  to  that  party  anything  like 
a  proportionate  representaton  in  the  Reichs- 
tag, has  nevertheless  had  marked  influence 
on  legislative  action.  On  the  part  of  all  the 
other  parties  there  appears  to  be  a  whole- 
some fear  of  the  increasing  power  of  the 
Socialists,  and  they  are  ready  to  adopt,  not 
only  any  unfair  means  that  they  may  devise 
to  compass  the  Socialists'  defeat,  but  they  are 
quite  ready  to  make  concessions  and  attempt 

383 


Business  and  Education 

to  placate  the  dissatisfied  workman.  No 
other  country  has  gone  so  far  as  Germany  in 
legislating  in  the  interests  of  the  working 
class.  The  system  of  old-age  pensions  is  the 
most  notable  example  of  such  legislation. 
By  Bismarck's  own  admission,  the  measure 
was  designed  to  take  the  wind  out  of  the 
sails  of  socialism.  It  was  believed  that  the 
interest  which  every  workman  would  be 
given  in  the  Government  through  a  prospec- 
tive pension  would  furnish  the  motive  for 
securing  the  support  of  the  working  classes 
for  the  Government  side.  The  ill  success  of 
the  scheme  from  that  standpoint  is  apparent. 
Nevertheless,  the  direst  foes  of  socialism, 
after  the  great  victory  of  the  Social  Demo- 
crats in  the  last  election,  called  for  further 
labor  reform  legislation  as  an  antidote 
against  the  spirit  of  socialism. 

In  the  Reichstag  there  has  been  a  flood  of 
enactments  for  the  benefit  of  the  laboring 
classes,  and  the  consideration  of  sugges- 
tions along  this  line  has  occupied  much  of 
the  time  of  members.  Labor  legislation 
has  been  popular  with  all  parties.  With  the 
Socialists,  naturally,  because  it  was  labor 
legislation  which  they  particularly  de- 
manded, and  with  the  other  parties  because 
they  thought  by  championing  the  cause  of 
labor  they  could  overcome  the  disaffection 
of    workingmen    in    their    ranks.      In    the 

384 


Political  Problems  of  Europe 

recent  budget  debates,  an  astonishing 
amount  of  time  was  given  to  petty  questions 
regarding  the  wages  of  workmen  in  certain 
Government  shops,  their  hours  of  work,  and 
the  regulations  controlhng  their  employ- 
ment. 

There  is  every  reason  to  believe  that  legis- 
lation favoring  the  working  classes  will  con- 
tinue to  be  enacted  by  the  Reichstag.  Soon 
after  the  opening  of  the  last  session.  Count 
von  Billow  announced  that  the  Government 
hoped  eventually  to  bring  forward  a  scheme 
of  insurance  for  widows  and  orphans,  at  the 
public  expense,  and  it  was  also  intimated 
that  some  plan  for  insuring  workingmen 
against  non-employment  was  under  con- 
sideration as  a  probability  within  the  next 
ten  years.  Thus,  the  State,  as  an  antidote 
to  socialism,  adopts  measure  after  measure 
of  a  distinctly  socialistic  character. 

An  idea  of  the  activity  in  turning  out 
social  reform  laws  can  be  gained  by  enumer- 
ating some  of  the  recent  legislation  of  this 
kind.  In  1899  the  system  of  old-age  pen- 
sions was  revised  and  extended,  and  the 
rate  of  pension  payments  was  increased; 
then  the  law  on  accident  insurance  was 
amended  and  improved.  In  1902  a  law 
defining  the  rights  of  seamen  was  thor- 
oughly overhauled  and  brought  into  har- 
mony with  the  spirit  of  modern  labor  reform 
25  385 


Business  and  Education 

views  in  Germany.  A  revision  of  the  sick- 
insurance  law  was  made  last  year.  Laws 
regulating  the  relations  between  tradesmen 
and  their  employees  have  been  passed,  mak- 
ing specific  provisions  regarding  the  hours 
of  closing,  number  of  hours  for  work,  and 
daily  intermission  for  meals.  A  resolution 
has  been  passed  asking  for  a  bill  similarly  to 
protect  the  employees  of  lawyers,  notaries, 
and  bailiffs.  There  have  also  been  many 
laws  passed  regulating  the  hours  of  employ- 
ment in  all  manner  of  industries. 

The  German  Government  is  pleased  to 
busy  itself  in  passing  many  laws  for  the  ben- 
efit of  the  working  population,  but  it  never 
fails  to  assume  the  position  of  having  con- 
ferred favors  rather  than  of  having  granted 
rights  that  intrinsically  belonged  to  the  class 
which  the  legislation  concerns.  In  such  leg- 
islation the  Government  always  assumes  the 
position  of  the  giver  of  benefits  to  inferior 
beings.  All  this  is  apparent  from  the  atti- 
tude of  the  different  ministers  toward  the 
lower  Government  officials  and  employees, 
who  are  domineered  over  in  an  astonishing 
way.  The  right  of  organization  by  minor 
Government  employees  is  severely  frowned 
upon,  and  the  harshest  means  are  used  to 
prevent  it.  If  the  political  footsteps  of  the 
Government  employee  stray  into  the  path 
of  Social  Democracy,  they  are  quick  to  en- 
386 


Political  Problems  of  Europe 

counter  serious  obstacles.  Count  von  Biilow 
has  enunciated  the  principle  that  no  Govern- 
ment employee  can  be  a  Socialist  and  every 
under  official  adopts  that  view. 

The  Government  looks  with  scant  favor 
on  any  sort  of  labor  organization  and  stead- 
fastly refuses  to  enact  a  law  to  permit  labor 
unions  to  affiliate  with  each  other  in  joint 
associations.  That  has  long  been  one  of  the 
points  of  Socialist  demand,  and  it  is  a  per- 
mission strongly  desired  by  the  working 
classes  generally.  Last  year  a  great  con- 
gress of  union  socialistic  workmen  was  held 
at  Frank fort-on-the-Main.  That  congress 
represented  600,000  members,  and  it  de- 
clared the  solidarity  of  those  members  with 
the  Socialists  in  respect  to  the  demand  for 
permission  to  affiliate  the  labor  unions.  Va- 
rious resolutions  have  been  passed  in  the 
Reichstag  in  favor  of  this  extension  of  lib- 
erty to  the  workmen,  but  these  resolutions 
have  availed  nothing.  A  delegation  from 
the  Frankfort  congress  presented  their  views 
in  a  petition  to  Count  von  Biilow,  who 
promised  to  "  take  it  into  benevolent  con- 
sideration." 

There  is  a  class  of  politicians  in  Ger- 
many, members  of  the  two  conservative 
parties  and  the  National  Labor  party,  who 
are  called  in  the  political  jargon  of  the  day 
the  "  Scharfmacher."     They  are  men  who 

387 


Business  and  Education 

want  sharp,  repressive  measures  against 
labor  agitators,  strikers,  and  particularly 
against  Socialists.  They  are  the  stalwarts, 
the  men  of  firm  hand  and  implicit  belief 
in  relentless  governmental  authority.  The 
"  Scharfmacher  "  defend  the  excessively  vig- 
orous discipline  in  the  army,  and  they  ap- 
prove of  the  action  of  the  courts  in  their 
frequent  punishment  of  lese-majesty. 

The  Socialist  movement  is  thus  seen  to 
be  a  live  political  force  in  Germany,  Bel- 
gium, France,  Italy,  and  Austria,  while  in 
England,  although  it  holds  no  position  in 
national  politics,  it  has  accomplished  more 
in  the  direction  of  municipal  activities  than 
has  been  done  elsewhere.  The  general 
tendency  is  toward  moderation.  The  revo- 
lutionary Socialists  are  everywhere  in  the 
minority  in  their  party,  and  the  tendency  is 
further  to  reduce  their  influence.  In  general, 
the  whole  Socialist  movement  is  becoming 
more  opportunist,  there  is  a  growing  dis- 
position to  be  more  practical,  to  endeavor 
to  obtain  such  concessions  as  they  can,  and 
not  hold  out  too  strongly  for  the  adoption 
of  an  entire  programme  and  a  general  over- 
turning of  the  present  social  order.  The 
theoretical  and  academic  socialism  is  giving 
way  in  some  measure  to  a  socialism  which 
takes  note  of  practical  politics. 

Beyond  all  question,  many  of  the  things 
388 


Political  Problems  of  Europe 

which  the  Sociahsts  are  striving  for  are 
economically  sound,  ethically  just,  and  po- 
litically desirable.  They  are  fighting  class 
privilege  and  the  traditions  of  caste;  they 
are  struggling  for  a  fairer  franchise  and 
more  truly  representative  government.  They 
are  everywhere  the  party  which  upholds  the 
rights  of  the  weak,  and  more  earnestly 
than  any  other  party  they  seek  to  secure 
to  every  citizen  political  equality  and  indi- 
vidual liberty. 

With  such  objects  and  aims,  there  is  no 
wonder  that  the  movement  grows.  But  all 
that  is  not  socialism;  it  is  only  liberalism 
at  its  best.  Unfortunately,  the  Socialist  par- 
ties are  not  made  up  altogether  of  moderate 
and  fair  liberals.  While  it  is  true  that  some 
of  their  demands  will,  when  secured,  mean 
that  Europe  has  taken  steps  toward  distinctly 
better  government,  those  moderate  and  sen- 
sible measures  form  only  part  of  their  pro- 
grammes. Other  phases  of  their  demands 
represent  the  spirit  of  unrest,  of  dissatisfac- 
tion with  existing  conditions,  of  class  envy, 
of  faith  in  those  fallacies  which  lead  men  to 
believe  that  they  can  substitute  legislation  for 
thrift  and  industry,  that  a  comfortable  old 
age  is  a  right  to  be  demanded  wholly  from 
the  State  and  without  any  contribution  of 
economy  and  present  sacrifice  from  the 
individual. 

389 


Business  and  Education 

The  whole  Socialist  movement  is  largely 
a  class  movement;  it  draws  a  line  between 
property  and  poverty,  and  is  constantly 
running  the  danger  of  listening  to  dema- 
gogue leaders  who  appeal  to  envy  and  pas- 
sion, and  under  a  guise  of  justice  and  equal- 
ity propose  measures  that  are  unjust  and 
inequitable.  It  is  antagonistic  to  religion, 
not  only  contesting  the  power  of  the  Church 
but  openly  avowing  atheistic  views.  The 
movement  has  in  it  the  promise  of  good 
and  the  danger  of  evil.  The  good  is  pretty 
certain  to  be  accomplished,  for  in  the  end 
it  will  appeal  to  the  fair-minded  of  all  par- 
ties; the  evil  may  be  great  or  small  in  pro- 
portion to  the  fairness  of  the  Socialists'  op- 
ponents. All  European  government  is  cer- 
tain to  make  ultimate  progress  toward  an 
equality  of  rights  for  all  citizens.  If  the 
conservatives,  the  agrarians,  and  the  cler- 
icals raise  in  the  way  of  that  progress  ob- 
stacles which  will  not  give  way,  they  may 
call  into  play  some  of  the  high  explosives 
that  are  to  be  found  in  the  programmes  of 
the  revolutionary  branches  of  the  Socialist 
parties.  On  the  whole,  however,  I  doubt  if 
the  Socialist  movement  is  likely  to  do  much 
permanent  political  harm  to  Europe,  while 
it  already  has  done  and  will  continue  to  do 
considerable  good. 

It  has  seemed  worth  while  going  some- 

390 


Political  Problems  of  Europe 

what  fully  into  the  Socialist  movement,  be- 
cause the  Socialist  parties  of  Europe  present 
about  the  only  political  tendencies  toward 
change  which  there  are  there.  They  are 
opposed  by  parties  of  reaction  or  parties 
anxious  to  maintain  the  status  quo.  The 
success  of  the  Socialist  parties  will  in  the 
main,  for  the  present  at  least,  mean  the  suc- 
cess of  liberalism.  Such  success  will  not  be 
likely  to  affect  greatly  commercial  relations 
between  Europe  and  America.  Success  in 
some  of  their  endeavors  will  undoubtedly 
tend  to  raise  the  cost  of  production  in  Eu- 
rope, but  such  tendency  would  probably  be 
counteracted  by  the  greater  industrial  effi- 
ciency which  improved  social  conditions 
would  bring. 

One  of  the  most  striking  differences  be- 
tween Europe  and  America  is  the  persist- 
ence of  racial  type  there  and  here  the  tend- 
ency to  amalgamate  all  races  into  the 
American.  Time  seems  to  bring  only  in- 
creased bitterness  to  racial  antagonisms  in 
Europe,  while  with  us  the  third  generation, 
at  the  outside,  is  completely  merged  into 
the  American  type.  I  never  have  been  able 
to  understand  just  what  it  is  that  keeps  the 
rancor  of  races  at  such  a  virulent  pitch 
among  near  neighbors  in  Europe,  when 
those  same  races  will  here  renounce  lan- 
guage, flag,  and  racial  aspirations,  and  joy- 

391 


Business  and  Education 

fully  and  completely  merge  into  the  Ameri- 
can—  all  patriotic,  all  loyal  to  the  Govern- 
ment, all  in  a  generation  more  anxious  to 
cover  every  trace  of  foreign  characteristics 
with  the  mantle  of  sovereign  American  citi- 
zenship than  they  are  to  perpetuate  a  single 
one  of  those  racial  prejudices  which  for  gen- 
erations made  enemies  of  their  fathers. 

In  the  case  of  races  that  are  living  side 
by  side,  that  are  occupied  with  the  same 
general  problems  of  life,  and  that  would 
enjoy  the  same  measure  of  benefit  or  endure 
the  same  degree  of  hardship  as  legislation  is 
economically  good  or  bad,  one  would  sup- 
pose that  time  would  soften  the  asperities 
of  racial  dislikes.  In  Europe  it  is  not  so. 
There  are  some  nine  races  in  Austria,  for 
example,  and  the  most  beneficent  piece  of 
legislation  that  could  be  devised  for  the  ben- 
efit of  the  whole  country  would  be  coldly 
received  compared  with  the  delight  with 
which  eight  of  these  races  might  for  a  mo- 
ment unite  to  bring  discomfort  to  the  ninth. 
They  never  unite  for  the  common  good  — 
it  is  only  that  they  may  at  the  moment  feel 
a  common  hatred  for  some  third  race  strong 
enough  to  bring  them  together  in  an  attempt 
to  harass  the  common  enemy. 

The  economic  importance  of  these  racial 
antagonisms  is  enormous.  With  our  homo- 
geneous population  it  is  hard  for  us  to  un- 

392 


Political  Problems  of  Europe 

derstand  what  a  drag  and  a  block  an  effi- 
cient government  must  follow  when  senti- 
ment instead  of  sense  must  be  appealed  to 
in  the  legislative  chambers.  The  govern- 
ment machinery  of  Hungary  was  practi- 
cally paralyzed  for  a  year  because  there  was 
a  deadlock  over  the  question  whether  the 
army  should  march  to  the  command  of 
"  Vorwarts,  marsch !  "  or  "  Elore,  indulj !  " 
whether  the  word  of  command  should  be  in 
the  Magyar  tongue  or  in  the  German. 

The  language  question  in  itself  is  of  enor- 
mous importance,  and  there  seems  no  tend- 
ency toward  it  becoming  less  so.  The  most 
earnest  efforts  are  made  to  continue  separate 
schools  for  all  the  varied  tongues  that  con- 
fuse and  make  difficult  the  life  of  Europe. 
The  persistence  of  each  type  of  language  is 
in  itself  of  great  economic  moment,  for  it 
is  a  most  difficult  barrier  against  that  free 
commercial  intercourse  —  intercourse  where 
there  is  mutual  understanding  and  confidenr^ 
—  which  does  so  much  to  permit  the  rapid 
expansion  of  trade.  A  Europe  with  one 
language  and  without  the  barrier  of  internal 
tariff  walls,  a  Europe  which  offered  such  a 
field  for  the  free  and  natural  expansion  of 
commerce  as  does  the  United  States,  would 
be  a  Europe  whose  economic  force  was  so 
increased  that  no  one  could  say  how  vast  the 
gain  would  be. 

393 


OF  THE 

UNIVERSITY 


Business  and  Education 

The  struggle  between  the  two  races  in 
Bohemia  —  that  is,  between  the  Czechs  and 
the  Germans  —  is  probably  the  most  acute 
and  typical  example  of  the  racial  difficulties 
throughout  Austria.  There  are  in  Bohemia 
9,3(X),ooo  inhabitants,  who  are  divided  into 
5,800,000  Czechs,  3,300,000  Germans,  and 
200,000  Poles.  According  to  the  budget  of 
1 90 1,  German  Bohemia  pays  250,542,000 
crowns  for  taxes  to  the  State;  that  is,  66 
per  cent  of  the  total  for  Bohemia;  but  the 
State  expends  only  32,992,000  crowns  in  the 
German  districts,  while  it  expends  104,945,- 
000  crowns  in  the  Czech  part  of  the  country, 
which  pays  only  128,494,000  crowns  of 
taxes.  The  figures  are  so  juggled,  both  by 
the  Germans  and  the  Czechs,  that  it  is  almost 
impossible  to  get  a  fair  estimate  of  the  real 
number  of  each  in  the  country,  of  the  amount 
they  pay  in  taxes,  or  of  what  they  receive. 

The  Czechs  say  that  the  language  struggle 
in  Bohemia  was  provoked  by  the  Germans, 
who  placed  over  their  shops  and  restaurants 
inscriptions  such  as  "  Forbidden  to  talk 
Czech  "  or  "  Entrance  is  Forbidden  to  Beg- 
gars, Dogs,  and  Czechs  " ;  whereas  the  Ger- 
mans say  that  although  Prague  is  the  capital 
of  a  bilingual  country,  the  town  councils  do 
not  allow  German  names  to  be  used  in  the 
streets ;  and  an  amusing  feature  of  the  strug- 
gle is  that  the  Slav  Congress  held  in  1898  at 

394 


Political  Problems  of  Europe 

Prague  was  obliged  to  use  German  as  the 
official  language  of  debate,  as  it  was  the 
only  tongue  which  all  the  delegates  under- 
stood. 

Throughout  Austria  the  struggle  between 
Czechs  and  Germans  is  particularly  keen 
over  the  schools.  Two  rival  school  associ- 
ations, one  German  and  the  other  Czech,  use 
every  means  in  their  power,  the  one  to  Ger- 
manize the  Czech  children,  and  the  other  to 
teach  them  the  cult  of  the  Czech  language 
and  nationality. 

Austria-Hungary  and  the  Balkan  coun- 
tries we  recognize  as  the  home  of  racial  an- 
tagonisms. Such  a  great  percentage  of  the 
political  life  there  is  absorbed  in  these  con- 
troversies that  commercial  and  social  inter- 
ests have  but  scant  recognition.  But  we  are 
not  so  apt  to  remember  that  in  Germany  one 
of  the  fundamental  problems  of  government, 
and  one  of  the  most  perplexing  and  impor- 
tant, has  to  do  with  the  discontent  of  the 
fragments  of  the  nationalities  which  are  still 
unreconciled  to  the  Imperial  Government. 
These  are  the  people  of  Alsace-Lorraine,  the 
Danes  of  North  Schleswig,  the  Hanoverians, 
and  the  Poles.  In  the  conquered  French 
provinces  there  has  been  some  real  head- 
way in  breaking  down  the  old  antipathies, 
but  nowhere  else  is  there  much  progress. 
The  discontent  along  the  Danish  border  is 

395 


Business  and  Education 

gaining  in  importance,  thriving  on  the  un- 
wise poHcy  of  the  Prussian  Government  in 
guarding  too  zealously  against  all  petty 
demonstrations  of  Danish  sympathy.  The 
Government  acted  with  great  harshness  a 
few  years  ago  in  expelling  Danish  house 
servants,  farm  laborers,  and  other  humble 
folk  because  they  sang  Danish  songs,  and  in 
other  simple  ways  proclaimed  their  Danish 
sentiments,  and  only  recently  the  Minister 
of  the  Interior  has  implied  threats  that  such 
expulsions  may  be  resumed.  The  Hanove- 
rians have  never  been  reconciled  to  the  union 
of  the  old  kingdom  of  Hanover  with  Prus- 
sia, and  the  Guelph  party  still  elects  half  a 
dozen  members  of  the  Reichstag.  In  the 
last  session  of  the  Diet,  Herr  von  Hammer- 
stein,  the  Prussian  Minister  of  the  Interior, 
declared  that  the  Guelphs,  next  to  the  So- 
cialists, were  the  element  most  dangerous  to 
the  existence  of  the  State. 

All  these  racial  discontents  are  nothing, 
however,  compared  with  the  race  problem 
in  the  Polish  provinces.  In  the  province  of 
Posen,  some  parts  of  East  Prussia,  and  in 
the  mining  districts  of  Selesia,  the  Govern- 
ment meets  one  of  the  most  serious  of  all 
its  difficulties,  and  one  that  seems  to  become 
more  serious  with  time.  The  Poles  have 
lately  been  growing  more  radical,  and  in- 
stead of  working  in  political  harmony  with 

396 


Political  Problems  of  Europe 

the  Clerical  party,  as  they  once  did,  they 
have  drawn  political  lines  strictly  in  ac- 
cordance with  their  racial  aims,  and  have 
even  put  candidates  in  the  field  against  their 
old  allies,  the  Clericals,  and  that  with  occa- 
sional success.  Even  the  Polish  Socialists, 
unlike  the  Socialists  elsewhere  in  Germany, 
show  a  strong  disposition  to  pursue  paths 
of  their  own,  rather  than  act  with  the  Social- 
Democratic  organization. 

The  pacification  of  the  Poles  has  called 
forth  enormous  effort  from  the  Prussian 
Government,  and  astonishing  expenditures, 
but  all,  apparently,  to  little  purpose.  The 
scheme  in  which  the  Prussian  Government 
puts  greatest  faith,  and  for  which  it  has  made 
unstinted  appropriations,  has  been  the  pur- 
chase of  large  estates  in  the  Polish  prov- 
inces for  the  purpose  of  dividing  them  into 
small  holdings  and  settling  Germans  upon 
them,  with  the  hope  of  thus  Germanizing 
the  country.  Bismarck  started  the  policy 
in  1866  with  a  fund  of  100,000,000  marks; 
in  1898  that  was  increased  to  200,000,000 
marks,  and  in  1902,  the  appropriation  being 
nearly  exhausted,  a  further  vote  of  150,000,- 
000  marks  was  made,  with  an  additional 
grant  of  100,000,000  marks  for  the  purpose 
of  acquiring  Polish  estates  to  be  turned  into 
state  domains  and  forests.  There  has  thus 
been   an   authorized  expenditure  of  $112,- 

397 


Business  and  Education 

000,000,  with  results  that  leave  the  popula- 
tion to-day  as  antagonistic  to  the  Govern- 
ment as  it  was  when  Bismarck  conceived  the 
scheme. 

The  Poles  are  by  no  means  poor,  and 
they  met  this  policy  of  "  pacification  by 
Reichsmarks  "  with  a  private  organization. 
A  great  Landbank,  provided  with  ample 
capital,  has  been  established  with  the  pur- 
pose of  undoing  the  work  of  the  Govern- 
ment. The  Landbank  buys  land  from  the 
thrifty  German  settlers  and  returns  the  na- 
tive Poles  to  till  it.  The  Settlement  Com- 
mission, which  has  charge  of  the  Govern- 
ment's scheme  for  settling  Germans  on  these 
Polish  lands,  meets  with  the  greatest  diffi- 
culty in  buying  land  from  Poles,  but  on  the 
other  hand,  it  is  forced  to  buy  out  every 
German  holder  who  wishes  to  sell,  else  his 
land  will  again  fall  into  Polish  hands.  The 
commission  bought  more  than  100,000  acres 
of  land  last  year,  and  only  about  7,000  acres 
of  that  was  acquired  from  Polish  owners, 
while  well  over  90,000  acres  were  taken 
over  at  high  prices  from  Germans  who 
wanted  to  leave  the  country  or  wished  to 
abandon  the  farm  for  the  town. 

The   Government  has  settled  about  50,- 

000  Germans  upon  these  Polish  lands  since 

the  policy  was  inaugurated.     This  artificial 

competition  for  land  which  has  been  going 

398 


Political  Problems  of  Europe 

on  between  the  Government  Settlement  Com- 
mission and  the  Polish  Landbanks  has  re- 
sulted in  absurd  advances  in  prices.  For 
some  years  after  the  Settlement  Commis- 
sion began  its  operation,  land  was  bought 
at  an  average  of  $54  an  acre.  By  1902  the 
price  had  risen  to  $Sy  per  acre,  and  last 
year  to  $111. 

The  two  races  have  come  to  a  deadlock 
in  their  relations  with  each  other.  Every 
year  there  is  a  great  Polish  debate  in  the 
Reichstag,  but  it  only  serves  to  bring  out  in 
bold  relief  the  irreconcilable  antagonism  be- 
tween German  and  Pole. 

The  significance  of  the  language  question 
is  well  understood  by  the  European  mon- 
archs.  In  the  Park  Club  in  Budapest,  the 
club  of  the  Magyar  aristocrats,  which  cannot 
be  matched  for  artistic  beauty  of  furnishing 
by  any  of  the  marble  halls  of  our  gaudy 
American  clubs,  there  hang  two  portraits, 
and  only  two.  One,  of  course,  is  that  of  the 
Emperor  Franz  Josef;  the  other  is  William 
11. 

I  asked  how  it  happened  that  the  German 
Emperor  was  so  honored. 

"  He  has  had  his  second  son  taught  the 
Magyar  language,"  answered  my  host. 
"  That  boy  may  sometime  wear  the  crown  of 
the  Magyar  kings." 

And  there  might  be  stranger  things. 

399 


Business  and  Education 

Russia  has  her  full  share  of  racial  diffi- 
culties, and  in  her  conflict  with  Poles,  Finns, 
and  Jews  has  been  led  into  injustice  and  bar- 
barity of  the  sort  that  makes  two  enemies 
of  the  Government  where  there  was  one 
before. 

Comparisons  of  the  problems  which  be- 
set the  European  governments  with  the  diffi- 
culties that  are  met  with  in  our  own  institu- 
tions cannot  help  but  make  us  better  satisfied 
with  American  citizenship. 

We  find  there  implacable  racial  differ- 
ences, varied  degrees  of  political  develop- 
ment which  it  is  vainly  sought  to  unite  into 
harmonious  empires,  relics  of  feudal  au- 
thority, hereditary  distinctions,  and  class 
prerogative  quite  out  of  line  with  a  modern 
conception  of  representative  government. 
There  are  diametrically  opposed  interests 
of  agriculture  and  industry  which  can  never 
be  reconciled.  We  see  a  drawing  of  class 
lines  in  political  life,  and  appeals  to  the 
passions  of  envy  and  greed,  and  to  the  prej- 
udices of  caste  and  ignorance.  It  is  start- 
ling to  note  what  enormous  factors  in  the 
situation  are  the  personalities  of  half  a 
dozen  hereditary  sovereigns,  and  what  sig- 
nificance and  possibilities  lie  in  the  mere 
chance  readjustment  of  a  crown.  We  see 
the  growing  strength  of  the  parties  of  pro- 
test, the  vitality  of  the  Socialist  movement, 
400 


Political  Problems  of  Europe 

the  difficulties  of  government  finance,  the 
weight  of  taxes,  the  load  of  the  military 
and  naval  establishments,  the  menace  of  war, 
the  ever-living  danger  in  close  national 
neighbors  who  misunderstand  motives  and 
lack  sympathy  for  the  trials  and  ambitions 
of  the  others  —  and  then,  when  we  turn  to 
our  own  political  situation,  we  see  a  nation 
greater  in  numbers  and  vastly  greater  in 
resources  than  any  of  the  nations  of  Europe, 
with  a  single  language,  and  with  but  a  single 
problem  of  race,  and  with  a  common  pa- 
triotism that  every  one  knows  is  far  above 
party  differences.  When  the  political  con- 
ditions of  Europe  and  America  are  so  com- 
pared, the  study  can  but  make  us  thankful 
that  we  have  such  a  sound  foundation  upon 
which  to  grow,  and  so  few  complications  to 
interfere  with  our  right  development. 

IV.    Government  Education 

In  determining  the  relative  efficiency  of  na- 
tions competing  in  the  commercial  and  in- 
dustrial fields,  there  are  several  factors  of 
prime  importance.  The  nature  of  the  Gov- 
ernment, the  character  of  the  people,  the 
natural  resources  of  the  country,  each  have 
distinct  influence.  All  government  grows 
better,  so  there  is  a  tendency  toward  equal- 
ization of  advantages  in  this  respect.  Cheap- 
26  401 


Business  and  Education 

ness  of  transportation  tends  to  equalize  the 
disadvantages  of  a  lack  of  raw  material. 
Hereditary,  racial,  and  climatic  influences 
are  each  important  in  determining  the  char- 
acter of  the  people,  and  so  far  as  char- 
acter is  influenced  by  these  factors  it  changes 
slowly.  The  quickening  influence  that  may 
bring  rapid  change  in  the  national  character- 
istics of  a  whole  people,  and  that  may  be- 
come of  immense  importance  to  their  indus- 
trial efficiency,  is  education. 

In  any  study  of  the  comparative  indus- 
trial efficiency  of  nations  some  comprehen- 
sion of  the  scope  and  tendency  of  their  edu- 
cational system  is  of  the  greatest  impor- 
tance. As  industry  becomes  more  and  more 
highly  organized  and  commerce  more  wide- 
spread and  complex  the  influence  of  educa- 
tion is  a  factor  of  rapidly  increasing 
importance. 

The  President  of  one  of  the  great  railway 
systems  of  the  United  States  once  expressed 
that  fact  to  me  in  this  way : 

"  As  railway  business  in  the  United  States 
is  developing,"  he  said,  "  and  as  the  organi- 
zation of  the  business  of  transportation  be- 
comes more  complete,  there  is  working  a 
distinct  change  in  the  character  of  the  men 
required  for  the  successful  operation  of  our 
properties.  While  the  railroad  business  was 
in  something  of  a  pioneer  stage,  men  were 
402 


Political  Problems  of  Europe 

required  who  had  native  force,  who  would 
quickly  and  successfully  meet  every  form  of 
obstacle.  In  the  West  particularly,  we  de- 
veloped a  corps  of  railway  employees  who 
for  resourcefulness,  vigor,  and  strength  were 
probably  never  equalled  in  any  other  sort  of 
organization.  The  requisite  then  was  to  get 
the  thing  done,  to  get  the  train  through,  to 
repair  the  washout,  to  get  the  wrecked  en- 
gine back  on  the  track,  to  move  the  traffic. 
It  did  not  matter  so  much  how  it  was  done. 
The  point  was  to  get  it  done,  and  methods 
were  evolved  which  were  never  heard  of  in 
the  most  advanced  schools  of  technology. 
For  a  good  many  years  not  much  attention 
was  paid  to  the  refinements  of  traffic  statis- 
tics. We  were  not  interested  in  the  particu- 
lar fraction  of  a  mill  which  it  cost  to  move 
a  ton  of  freight  a  mile.  We  were  just  in- 
terested in  moving  it,  and  the  most  resource- 
ful men,  the  men  who  would  best  overcome 
unexpected  difficulties,  and  do  it  quickly  with 
the  very  limited  resources  which  were  at 
command,  were  the  men  who  were  most  suc- 
cessful in  the  railway  field. 

"  All  that  is  changing,  and  in  many  sec- 
tions of  the  country  has  already  completely 
changed.  In  those  days  that  are  past  a 
technical  education  counted  for  little.  All 
the  knowledge  that  a  man  ever  got  out  of  a 
technical  school  would  not  have  helped  him 
403 


Business  and  Education 

much  in  many  of  the  emergencies  which 
were  the  daily  Hfe  of  railroad  managers. 
Resourcefulness,  mother-wit,  determination, 
and  strength  were  what  was  wanted.  But 
the  men  who  possessed  these  characteristics, 
and  who  made  the  greatest  success  in  rail- 
road business  under  those  pioneer  condi- 
tions, began  later  to  find  that  there  were  men 
growing  up  in  the  organization  of  the  older 
roads  who  could  design  a  locomotive  that 
would  pull  a  longer  train  than  any  they  could 
move,  and  do  it  with  less  coal;  men  who 
could  build  stronger  bridges  for  less  money, 
because  they  could  calculate  to  a  mathe- 
matical nicety  strain  and  strength  of  ma- 
terial ;  men  who,  though  they  might  be  lack- 
ing in  those  forceful  characteristics  which 
had  brought  success  on  the  new  roads,  were 
able,  with  their  thorough  technical  knowl- 
edge, to  reduce  cost,  to  effect  economies,  to 
perfect  systematic  organization,  and  to  con- 
tribute toward  the  creation  of  a  railway  sys- 
tem so  smoothly  running  and  so  well  organ- 
ized that  the  very  emergencies  which  the 
pioneer  railroad  men  had  made  their  repu- 
tations in  meeting  will  never  arise.  We  still 
want  resourcefulness,  vigor,  and  force,  but 
those  qualities  must  now  be  coupled  with 
technical  knowledge.  Other  things  being 
equal,  the  railroad  with  the  best  educated 
staff  will  be  the  most  successfully  operated." 
404 


Political  Problems  of  Europe 

The  view  of  this  railroad  president  in  his 
own  field,  I  believe,  illustrates  what  is  much 
the  same  condition  in  almost  every  line  of 
industry.  American  resourcefulness  has 
been  the  wonder  of  the  world,  and  has  ac- 
complished, surrounded  as  it  has  been  with 
unparalleled  richness  of  raw  material,  an 
unequalled  industrial  development.  But  we 
are  reaching  a  point,  and  the  older  nations 
of  the  world  have  long  before  us  reached 
that  point,  where  it  is  of  great  importance 
that  technical  training  and  scientific  educa- 
tion shall  be  brought  to  bear  on  every  phase 
of  industrial  organization.  I  believe  that 
the  relative  efficiency  of  nations  was  never 
before  so  largely  influenced  by  the  character 
of  their  educational  facilities  as  is  the  case 
to-day.  The  tendency  in  our  whole  indus- 
trial and  commercial  life  is  rapidly  giving 
added  importance  to  education. 

It  is,  I  know,  a  somewhat  common  view 
that  the  great  industrial  organizations  which 
are  the  order  of  the  day  tend  to  reduce  the 
workers  to  little  more  than  automatons. 
Some  people  believe  that  education  is  be- 
coming of  less  importance,  because  they 
see  that  there  is  a  tendency  toward  subdi- 
vision of  labor  in  these  great  organizations, 
resulting,  as  it  does,  in  so  arranging  the 
work  that  men  do  their  appointed  task  with 
the   smallest  need   for  thinking,   and   with 

405 


Business  and  Education 

less  requirement  in  the  way  of  mental  train- 
ing than  was  the  case  before  those  indus- 
tries were  so  highly  specialized  and  the  work 
so  subdivided.  That  view  is  correct  as  ap- 
plied to  a  great  mass  of  workers.  The 
automatic  machine  needs  little  more  than 
an  automatic  mind  to  run  it.  Our  great 
locomotive  shops,  for  instance,  have  so  sub- 
divided the  work,  and  have  produced  so 
many  special  and  almost  automatic  machines 
for  forming  each  part,  that  they  can  take  men 
off  the  streets  with  no  knowledge  of  mechan- 
ics, and  have  them  thoroughly  trained  in  a 
fortnight  to  do  some  particular  piece  of  work 
which  would,  under  the  old  methods  of  shop 
practice,  have  required  a  highly  skilled  and 
experienced  machinist  to  perform. 

These  industrial  combinations  and  con- 
solidations which  may  bring  almost  an  en- 
tire industry  under  a  single  management, 
create  a  demand  for  educated  labor,  how- 
ever, which  is  keener  than  ever  could  have 
been  known  under  a  system  less  highly 
specialized. 

Take,  for  example,  an  industry  in  which 
there  were,  say,  one  hundred  individual  or- 
ganizations, each  one  producing  an  average 
product  costing  $100,000.  An  industrial 
chemist  might,  with  his  technical  knowledge, 
we  will  say,  effect  a  saving  of  one  per  cent  in 
the  cost  of  this  product.  Suppose  that  were 
406 


Political  Problems  of  Europe 

made  clear  to  any  individual  employer.  He 
would  say  that,  although  he  might  effect  a 
saving  of  $i,ooo  in  the  cost  of  his  year's  out- 
put, the  salary  of  the  chemist  would  be 
$5,000.     He  could  not  afford  the  economy. 

With  these  industries  all  combined  the 
chemist's  $5,000  salary  could  be  paid,  and 
from  the  one  per  cent  saving  in  the  cost  of 
the  total  product  a  profit  of  $95,000  left  as 
a  result  of  the  economy  effected. 

As  combinations  are  made  in  the  indus- 
trial field,  the  possibility  of  employing  highly 
trained  technical  experts  rapidly  increases, 
and  in  that  possibility  alone  lies  frequently 
one  of  the  greatest  incentives  toward  com- 
binations. The  margin  of  profits  some- 
times grows  very  narrow  under  the  stress  of 
international  competition.  Where  there  is 
sharp  international  competition  the  pros- 
perity of  a  whole  industry  might  easily  de- 
pend on  whether  or  not  each  one  of  its  proc- 
esses were  conducted  according  to  the  very 
best  practice  the  ablest  technical  experts  can 
work  out. 

Technical  training  is  therefore  becoming 
of  vastly  more  importance  than  ever  before, 
and  those  nations  which  are  offering  the  best 
technical  training  to  their  youths  are  making 
the  most  rapid  industrial  progress.  A  study 
of  the  international  field  brings  that  fact  out 
with  perfect  clearness.  Where  education  is 
407 


Business  and  Education 

lacking  industry  is  lagging ;  where  education 
is  stereotyped  industry  is  without  initiative. 
The  necessity  for  thorough  education  and 
the  best  technical  training  has  become  al- 
most as  great  in  commercial  affairs  as  it  has 
in  the  industrial  field.  The  methods  of  com- 
merce to-day  cannot  be  as  easily  compared 
with  the  methods  of  a  generation  ago  as  can 
the  processes  of  industry  now  and  at  that 
time,  but  I  believe  that  the  changes  in  the 
methods  of  commerce  have,  in  many  cases, 
been  as  radical  and  the  improvement  as  great 
as  in  the  field  of  industry.  Two  generations 
ago  the  trained  engineer  was  looked  on  with 
disfavor  by  the  practical  industrial  manager. 
The  man  who  grew  up  in  the  business  was 
thought  far  superior  to  the  man  who  got  his 
knowledge  from  books.  The  necessity  for  a 
technical  engineering  training  is  now  uni- 
versally recognized,  and  no  important  indus- 
trial operation  would  be  undertaken  without 
the  aid  of  technical  experts.  I  believe  the 
same  change  is  coming  in  commercial  life. 
The  commercial  high  schools  of  Germany 
and  the  start  in  higher  commercial  education 
which  we  are  making  in  this  country  are  the 
forerunners  of  great  technical  schools  of 
commerce.  These  schools  will  turn  out  men 
with  as  superior  qualifications  for  commer- 
cial life  as  have  the  graduates  of  the  great 
technical  institutions  in  their  special  field, 
408 


Political  Problems  of  Europe 

I  believe  the  great  masters  of  commerce  will 
come  to  recognize  the  necessity  for  and  the 
practical  advantage  of  such  commercial 
training,  just  as  the  captains  of  industry 
have  long  ago  recognized  the  value  of  tech- 
nical training  for  engineers. 

The  requirements  for  the  successful  ad- 
ministration of  great  commercial  enterprises 
are  greater  than  ever  before.  The  scale  upon 
which  these  enterprises  are  organized  war- 
rants the  payment  of  high  salaries  to  men 
with  the  best  training,  and  I  believe  that 
those  nations  that  are  providing  schools  best 
adapted  to  the  thorough  training  of  recruits 
for  the  ranks  of  commerce  will  make  the 
greatest  progress  in  developing  the  commer- 
cial side  of  the  national  life. 

Education  in  its  relation  to  national  de- 
velopment is  viewed  from  two  fundamentally 
different  standpoints.  In  America  we  have 
in  large  measure  regarded  the  universal 
education  of  citizens  as  necessary  to  the 
proper  political  development  of  the  repub- 
lic. The  idea  underlying  our  whole  educa- 
tional system  has  been  that  the  sovereign 
citizen  must  be  given  such  training  as  will 
enable  him  to  form  his  political  opinions 
with  intelligence  and  to  vote  with  under- 
standing. The  effect  of  education  upon 
commerce  and  industry  has  been  quite  a 
secondary  consideration.  In  the  main  the 
409 


Business  and  Education 

work  of  the  schools  has  been  directed  toward 
turning  out  inteUigent  citizens,  and  but  com- 
paratively little  attention  has  been  given  to 
so  shaping  education  that  it  will  make  of 
each  student  the  most  effective  industrial 
unit  that  it  is  possible  to  produce. 

In  Europe  education  has  been  viewed 
from  a  different  standpoint.  The  theory  of 
education  in  Germany  has  been  that  it  should 
be  the  work  of  the  Government  schools  to 
turn  out  the  most  efficient  economic  units, 
while  the  tasks  of  the  captains  of  industry 
were  to  organize  these  units  into  the  most 
effective  economic  corps  possible.  The  re- 
sult has  been  the  most  thoroughly  trained 
and  organized  system  of  industry  in  the 
world,  with  the  possible  exception  of  our 
own,  and,  in  many  respects  the  German  sys- 
tem presents  points  of  superiority  even  in 
comparison  with  our  own  industrial  system. 

The  German  Government  years  ago  de- 
liberately set  to  work  to  organize  a  system  of 
education  which  should  be  a  means  of  na- 
tional development.  The  idea  was  not  that 
education  was  needed  to  make  intelligent 
citizens,  but  that  it  was  needed  to  make 
effective  industrial  units.  Intelligent  citizen- 
ship has  really  had  small  place  in  the  cen- 
tralized personal  government  which  the 
Kaiser  has  developed,  but  in  no  other  nation 
has  there  been  such  intelligent  administra- 
410 


Political  Problems  of  Europe 

tion  of  the  system  of  education  from  the 
point  of  view  of  training  men  to  work 
efficiently. 

In  France  there  has  been  quite  another 
fundamental  idea  underlying  the  whole  de- 
velopment of  education,  and  impressing  it- 
self strongly  on  the  national  character.  The 
school  system  of  France  seems  to  have  been 
designed  neither  to  make  intelligent  citizens 
nor  to  turn  out  effective  economic  units.  It 
seems  rather  to  have  had  for  its  object  the 
preparation  of  persons  to  pass  certain  Gov- 
ernment examinations.  A  double  incentive 
has  existed  of  sufficient  potency  to  shape  al- 
most every  mind  of  France  in  this  hard  and 
fast  mould  of  stereotyped  education.  This 
twofold  incentive  has  been  on  the  one  hand 
the  securing  of  a  reduction  of  the  forced 
military  service,  and  on  the  other  the  open- 
ing of  the  way  to  a  civil-service  appointment. 
The  student  who  succeeds  in  passing  the 
Government  civil  service  examination  may 
reduce  his  military  service  from  three  years 
to  one.  There  is  absolute  democracy  in  the 
French  army,  neither  birth  nor  wealth  offer- 
ing any  escape  from  the  military  service. 
The  one  way  leading  to  a  reduction  in  the 
length  of  that  service  is  through  a  Govern- 
ment examination.  It  is  easy  to  see,  there- 
fore, how  universal  must  be,  in  every  walk  of 
life,  the  incentive  to  mould  the  minds  of 
411 


Business  and  Education 

children  along  only  these  stereotyped  lines 
which  the  Government  examiner  recognizes 
as  an  education. 

It  is  through  this  same  door  that  entry 
must  be  made  to  a  civil  service  position,  and 
there  is  nothing  short  of  a  mania  in  France 
for,  drawing  a  public  salary.  The  result  has 
been  the  most  uniform  and  stereotyped  sys- 
tem of  training  that  youths  were  ever  sub- 
jected to.  There  are  nearly  400,000  paid 
officials  under  the  French  Government.  For 
every  voter  one  person  holds  some  sort  of  a 
public  office.  The  French  characteristic  of 
thrift  has  resulted  in  giving  a  vast  num- 
ber of  people  small  incomes  from  their  in- 
vestments. Economy  is  little  short  of  a 
national  disease  in  France.  This  army  of 
small  investors  has  incomes  insufficient  to 
support  them  in  idleness,  but  large  enough 
so  that,  with  only  a  small  addition  in  the 
way  of  a  salary,  the  financial  problem  of  life 
is  solved.  That  is  the  reason  why  there  is 
such  a  universal  desire  among  the  middle 
class  for  Government  employment,  and  why 
the  incentive  to  obtain  an  education  ena- 
bling one  to  pass  a  Government  examination 
is  so  overpowering. 

There  were  recently  vacancies   for  four 

clerks   in   the  office  of   the   prefect   of   the 

Seine.     For  these  four  positions  there  were 

registered  4398  applicants.     Washington  at 

412 


Political  Problems  of  Europe 

its  worst  surely  has  nothing  comparable  to 
that.  Every  one  of  these  4000  applicants, 
however,  could  have  passed  an  examination 
along  certain  stereotyped  lines  which  would 
have  delighted  the  hearts  of  our  civil  service 
reformers. 

The  result  of  the  French  system  of  educa- 
tion has  been  to  produce  an  extraordinary 
uniformity  of  mental  type  and  capacity,  es- 
pecially among  the  middle  classes.  The 
French  system  of  education  is  intensely  na- 
tional. Its  plan  is  exactly  the  opposite  from 
our  own  school  system.  With  us  the  local 
community  controls  primary  schools.  In 
France  the  local  community  has  no  voice  in 
the  matter.  The  French  system  is  the  most 
centralized,  the  most  strictly  regulated,  the 
most  autocratic,  and  the  farthest  removed 
from  democratic  ideas  of  any  other  school 
system  in  existence.  The  exact  uniformity 
of  the  schools  is  almost  unbelievable.  The 
Minister  of  Instruction,  sitting  in  his  office 
in  Paris,  can  tell  at  any  moment  just  what 
fable  of  Fontaine  each  child  of  a  certain  age 
throughout  the  whole  of  France  is  reciting. 
Teachers  are  not  allowed  any  latitude  at  all. 
The  result  is  to  leave  both  teachers  and 
scholars  almost  completely  lacking  in  peda- 
gogic originality. 

The  whole  national  life  is  being  affected 
by  this  uniform  system  of  education.     The 

413 


Business  and  Education 

corps  of  teachers  has  all  been  made  In  the 
same  mould.  All  have  passed  through  an 
exactly  similar  training.  All  have  passed 
successfully  exactly  the  same  Government 
examinations.  The  Government  tries  to 
break  in  on  this  deadly  uniformity  by  mak- 
ing a  point  of  sending  teachers  to  other  than 
their  native  districts.  Northern  teachers  are 
sent  to  southern  schools  and  southern  teach- 
ers to  northern  schools.  By  this  plan  the 
Government  possibly  does  something  to  fos- 
ter a  spirit  of  unity  throughout  the  nation, 
but  the  uniform  mould  into  which  every 
mind  is  forced  remains  the  same. 

There  is  no  tendency  in  France  toward 
making  the  educational  system  less  uniform. 
The  victory  of  the  Government  over  the 
religious  orders  and  the  consequent  closing 
of  the  clerical  schools  will  have  the  effect  of 
making  the  system  more  stereotyped  than 
ever.  There  are  French  educators  who  de- 
clare that  the  whole  school  system  of  France 
has  been  shaped  into  a  huge  civil  service 
employment  agency.  They  admit  that  true 
education  has  been  forgotten  in  the  effort  to 
coach  children  to  pass  certain  fixed  examin- 
ation forms. 

There  has  seemed  to  be  no  room  in  France 
for  the  growth  of  secondary  schools  or  col- 
leges —  schools  of  which  it  is  a  man's  pride 
to  be  an  alumnus,  and  where  a  fellowship 
414 


Political  Problems  of  Europe 

develops  that  is  an  important  influence  all 
through  life.  There  are  no  such  schools  in 
France  as  Rugby  and  Eton.  It  is  never  re- 
garded of  special  importance  where  a  man 
was  educated,  and  college  friendships  play 
a  smaller  part  in  after-life  than  is  the  case 
with  us  or  in  England  and  Germany.  The 
university  life  in  France  is  gathered  almost 
wholly  in  a  single  institution  in  Paris,  in- 
stead of  being  scattered  through  all  the 
provinces,  as  in  Germany.  The  so-called 
French  colleges  are  not  comparable  in  organ- 
ization with  the  German  gymnasiums  of  the 
various  grades.  The  technical  schools,  on 
the  other  hand,  have  been  much  more  dif- 
ferentiated in  France  than  in  Germany,  and 
instead  of  gathering  civil  engineering,  elec- 
trical engineering,  and  mining  engineering 
into  a  single  great  technical  school,  these 
subjects  are  taught  in  separate  schools.  The 
trade  schools  are  strong  in  the  lines  of  ar- 
tistic decoration.  In  some  respects  they  are 
the  best  of  the  whole  French  educational  sys- 
tem. They  are  in  the  main  not  a  part  of  the 
national  system,  but  are  under  the  control  of 
individuals. 

The  French  school-boy  is  taught  facts. 
Facts  are  ground  into  him  with  cruel  dili- 
gence. The  American  boy  would  be  stag- 
gered by  the  tasks  that  are  set  him.  The 
hours  that  he  spends  in  memorizing  make 

415 


Business  and  Education 

the  French  school  system  resemble  the 
Chinese.  Few  school-boys  in  other  coun- 
tries have  so  much  work  to  do.  None  are 
so  systematically  and  persistently  crammed 
with  knowledge.  But  the  French  school-boy 
is  not  taught  to  think.  The  result  of  such 
a  system  of  education  is  revealed  in  the 
national  life.  France  to-day  of  all  great 
nations  is  characteristically  without  initi- 
ative. She  is  not  maintaining  her  place  in 
the  first  rank  of  nations.  So  far  as  the 
great  middle  class  is  concerned,  France  is 
decadent.  It  is  true  that  there  are  painters, 
poets,  and  authors  who  are  geniuses  that  any 
nation  would  have  been  proud  of  in  any 
period,  but  they  are  the  exceptions.  Their 
minds  have  escaped  the  deadly  process  of 
stereotyped  French  education.  The  rule 
has  been  the  making  of  a  nation  with  minds 
all  formed  in  one  mould,  a  nation  which  is 
stationary  in  its  commerce,  its  industry,  and 
its  business  development,  and  which  is  push- 
ing on  to  no  new  accomplishments. 

The  French  have  wonderful  ability  for 
certain  skilful  and  artistic  forms  of  work. 
Their  industries  are  less  open  than  those  of 
any  other  country  to  the  competition  of  auto- 
matic machines  or  of  work  done  en  masse. 
No  tariff  walls  are  effective  barriers  against 
superior  taste  and  art.  That  fact  alone  is 
what  saves  the  industries  of  France.  She 
416 


Political  Problems  of  Europe 

has  neither  the  commercial  vigor  and  initi- 
ative nor  the  abiHty  for  commercial  and  in- 
dustrial organization  to  enable  her  to  com- 
pete with  Germany  or  the  United  States  in 
any  of  the  great  fields  of  international 
industrial  competition.  There  is  none  of  the 
modern  spirit  of  industrialism  which  mani- 
fests itself  in  that  superior  organization  and 
combination  which  are  the  keynotes  of 
industrial  life  in  Germany  and  the  United 
States.  There  are  lines  of  artistic  accom- 
plishment in  which  she  stands  unchallenged, 
but  in  industrial  organization  she  has  not 
taken  the  first  steps.  Perhaps  all  this  may 
offer  ground  for  congratulation  rather  than 
regret,  but  it  is,  at  any  rate,  an  obvious  fact, 
and  one  that  can  in  no  small  measure  be 
traced  to  the  French  system  of  education  and 
its  effect  in  shaping  the  national  character. 

In  England  as  well  as  in  France  the  sys- 
tem of  education  has  produced  marked  effect 
upon  the  national  character.  France  has 
just  been  through  a  great  national  struggle 
to  free  herself  from  the  clerical  schools. 
Education  in  England  is  still  in  the  hands  of 
the  clericals.  It  is  not  in  the  control  of  the 
teaching  orders  of  the  Catholic  Church,  it 
is  true,  but  it  is  practically  under  a  control 
exercised  by  the  Church  of  England.  It  is 
possible  that  such  a  control  of  education  is 
beneficial  to  the  morals  of  the  English  youth. 
27  417 


Business  and  Education 

There  can  be  nothing  more  certain,  however, 
than  that  it  has  proved  a  stumbhng  block  in 
the  development  of  anything  like  a  modern 
system  of  education.  The  Education  Bill 
passed  two  years  ago  makes  it  obligatory 
that  at  least  half  of  the  teachers  in  the  public 
schools  must  in  the  future  be  members  of  the 
Church  of  England.  The  result  of  the  con- 
trol which  the  Church  has  always  exercised 
in  greater  or  less  degree  has  not  been  one 
which  would  lead  educators  to  believe  that 
a  school  system  can  develop  along  the  best 
lines  when  under  the  control  of  any  single 
religious  organization.  There  is  nothing  in 
the  development  of  the  English  school  sys- 
tem up  to  the  present  that  leads  one  to  be- 
lieve that  the  Church  organization  is  well 
adapted  to  direct  a  modern  system  of  pri- 
mary education. 

In  America  we  find  a  schqol  system  de- 
signed to  make  intelligent  citizens;  in  Ger- 
many, a  system  intended  to  produce  the 
most  efficient  economic  units  possible;  in 
France  a  system  designed  uniformly  to 
mould  all  minds  to  pass  through  the  door  of 
a  Government  examination,  the  only  door 
which  opens  to  a  reduction  of  the  forced 
military  service,  and  to  possible  civil  em- 
ployment. In  England  none  of  these  stand- 
ards seem  to  have  been  set  up.  While  the 
corner-stone  on  which  the  great  German 
418 


Political  Frohlems  of  Europe 

Empire  has  been  built  has  been  an  educa- 
tional system  designed  and  recognized  as  a 
means  of  national  development,  the  states- 
men of  Great  Britain  have  never  given 
thought  to  education  from  that  point  of 
view.  No  British  statesman  seems  ever  to 
have  conceived  that  a  perfect  system  of  edu- 
cation would  redound  to  national  greatness. 
Colonial  expansion,  military  efficiency,  naval 
strength,  and  the  power  of  accumulated 
wealth  have  each  in  their  turn  appealed  to 
Englishmen  as  foundation  stones  upon  which 
to  build  a  greater  Britain,  but  the  thorough 
education  of  the  people  has  not  been  recog- 
nized as  one  of  the  most  substantial  of  foun- 
dation stones.  The  upbuilding  of  a  general 
system  of  education  as  a  means  for  national 
development  has  never  received  the  serious 
study  of  a  representative  body  of  English- 
men. 

The  debates  upon  the  Educational  Bill  two 
years  ago,  dragging  through  months  of  par- 
liamentary consideration,  never  once  rose  to 
an  intelligent  and  comprehensive  discussion 
of  Great  Britain's  needs  in  the  way  of  a 
better  school  system.  To  my  mind  there  is 
the  most  obvious  evidence  of  that  need. 
Parliament,  however,  spent  its  time  debating 
over  just  what  measure  of  control  the 
Church  of  England  should  have,  and  what 
small  voice  the  dissenters  would  be  permitted 
419 


Business  and  Education 

to  raise.  There  were  days  of  discussion  of 
these  points  without  the  sHghtest  recogni- 
tion of  how  great  is  England's  need  for  a 
thoroughly  efficient  modern  school  system. 

There  are  a  great  many  very  excellent 
people  in  England  who  do  not  believe  in 
universal  education.  I  have  talked  with 
university  men  who  hold  the  carefully  con- 
sidered opinion  that  universal  education,  ex- 
cept of  a  most  elementary  sort,  is  not  de- 
sirable for  the  nation.  They  believe  that  a 
serving  class  is  necessary,  and  that  education 
only  tends  to  make  such  a  class  dissatisfied 
with  its  lot.  Recognizing  that  there  is  a 
great  amount  of  unskilled  work  to  be  done, 
they  think  that  education  does  not  help  a 
man  to  do  it,  but  may  tend,  rather,  to  make 
him  dissatisfied  to  work  on  as  his  fathers 
have  worked.  Such  an  opinion,  I  believe, 
is  pretty  widely  held  in  England,  and  any 
scheme  looking  toward  carrying  universal 
education  beyond  the  most  primary  limits 
would  be  regarded  by  a  large  number  of 
admirable  people  with  disfavor. 

The  British  Government  has  no  disposi- 
tion to  load  the  national  budget  with  any 
further  increases  on  account  of  education. 
Since  the  South  African  War  the  Chancellor 
of  the  Exchequer  has  found  many  serious 
problems  in  the  budget.  It  was  found  pos- 
sible to  raise  a  billion  two  hundred  million 
420 


Political  Problems  of  Europe 

dollars  for  the  prosecution  of  the  Boer  War, 
but  English  statesmen  do  not  feel  that  the 
Government  can  afford  to  recognize  any  new 
claims  on  the  budget  for  the  support  of 
education. 

That  was  well  illustrated  recently  when 
the  representatives  of  all  the  universities  in 
England  held  a  conference  with  the  Prime 
Minister  and  the  Chancellor  of  the  Ex- 
chequer. At  this  meeting  it  was  sought  to 
impress  upon  the  Government  the  advisa- 
bility of  a  more  liberal  attitude  to  the  higher 
institutions  of  learning.  The  object  of  the 
meeting,  as  stated  by  Professor  Pelham  of 
Oxford,  was  "  to  impress  upon  the  Govern- 
ment certain  facts,  long  recognized  abroad, 
and  gradually  forcing  their  way  to  recogni- 
tion in  England,  the  facts  being  that  there 
was  such  a  thing  as  knowledge,  that  it  was 
as  well  worth  having  for  nations  as  for  indi- 
viduals, and  further  that  it  could  not  be  had 
without  paying  for  it." 

In  stating  the  claims  of  the  institutions  of 
higher  learning  for  some  support,  Mr. 
Chamberlain,  speaking  as  chancellor  of  the 
University  of  Birmingham,  said : 

"  In  the  competition  we  now  have  to  en- 
dure with  foreign  countries,  higher  educa- 
tion is  a  matter  of  the  first  importance. 
Those  who  are  to  be  leaders  of  industry, 
managers  of  our  works,  foremen  in  our 
421 


Business  and  Education 

shops,  should  have  a  much  higher  education 
than  the  mere  '  rule  of  thumb  '  knowledge 
they  have  possessed  up  to  the  present.  It  is 
to  provide  these  men,  who  will,  by  their  work 
hereafter,  I  believe,  return  a  splendid  divi- 
dend on  the  money  we  spend,  that  we  have 
promoted  these  local  universities,  and  that 
we  now  come  to  the  State  and  ask  it  to  take 
our  needs  into  consideration.  Already  the 
State  pays  something  like  £13,000,000  a  year 
for  primary  education,  but  only  a  few  thou- 
sand pounds  are  found  for  the  higher  edu- 
cation to  which  we  have  learned  to  attach  so 
great  a  value." 

Sir  William  White,  President  of  the  So- 
ciety of  Civil  Engineers,  told  the  Prime  Min- 
ister that  if  the  position  of  Great  Britain 
was  to  be  maintained,  it  was  absolutely  nec- 
essary that  the  system  of  educational  in- 
struction be  placed  on  the  best  possible  basis. 
While  Great  Britain  still  held  a  lead  in  ship- 
building, for  example,  both  Germany  and 
the  United  States  were  far  ahead  of  Great 
Britain  in  the  scientific  instruction  needful 
for  ship-building,  and  unless  the  scanty  pro- 
visions now  existing  in  England  for  such 
instruction  is  placed  more  on  an  equality 
with  the  provisions  in  Germany  and  the 
United  States,  that  lead  may  be  difficult  to 
maintain. 

Other  speakers  recognized  the  need  and 
422 


Political  Problems  of  Europe 

deplored  the  deficiencies  of  scientific  training 
and  the  work  of  research  in  England,  and 
declared  that  the  English  institutions  were 
handicapped  by  the  lavish  expenditures  of 
Continental  governments  and  the  munificence 
of  private  liberality  in  the  United  States. 

Mr.  Mosely,  who  at  the  head  of  a  com- 
mission had  given  the  system  of  education 
in  the  United  States  most  careful  study,  said 
that  he  was  so  impressed  with  the  advances 
in  this  country  that  he  had  decided  to  send 
his  two  sons  to  college  here. 

The  Chancellor  of  the  Exchequer,  in  reply 
to  these  representatives  of  higher  education, 
declared  that,  in  his  opinion,  it  would  be  a 
great  misfortune  if  it  were  once  to  be  thought 
that  it  was  the  duty  of  the  State  to  furnish 
the  whole  or  the  main  portion  of  the  cost  of 
the  higher  education  of  the  country,  or  even 
if  the  State  were  to  come  into  such  relations 
toward  university  education  as  it  now  oc- 
cupies toward  elementary  education.  The 
prospect  for  any  considerable  State  aid  to 
higher  education  in  England,  he  said,  is  a 
long  way  off. 

The  need  for  that  aid,  and  particularly  the 
need  for  great  improvement  in  the  facilities 
for  technical  education,  is  immediate  and 
obvious.  In  my  opinion,  no  small  part  of 
England's  loss  of  prestige  in  the  world's 
commercial  life  —  and  that  there  has  been  a 

423 


Business  and  Education 

relative  loss  there  can,  of  course,  be  no 
doubt  —  is  due  to  the  failure  of  the  great 
body  of  representative  and  intelligent  men 
who  shape  English  public  opinion  to  recog- 
nize the  important  influence  of  an  adequate 
school  system  upon  the  national  development. 
There  has  been  no  disposition  in  England 
to  adopt  the  view  which  underHes  the  whole 
German  educational  system  —  that  is,  the 
deliberate  creation  by  the  State  of  a  school 
system  as  a  means  for  national  development. 
English  statesmen  have  not  recognized  that 
through  developing  by  thorough  education 
the  effectiveness  of  each  individual  in  the 
nation  a  great  stride  is  taken  in  the  develop- 
ment of  the  nation  itself. 

Trade  education  in  Switzerland  has  been 
carried  out  as  completely  as  in  any  other 
country  in  Europe.  The  larger  towns  in 
Switzerland  are  probably  better  provided 
with  such  schools  than  any  towns  of  the 
same  size  in  the  world.  Cities  like  Zurich, 
Basel,  and  Bern  have  important  technical 
schools,  but  the  system  is  carried  out  as  well 
in  the  smaller  towns.  The  Government  has 
done  a  great  deal  in  the  way  of  encouraging 
exhibitions  and  sending  out  travelling  sam- 
ple collections  throughout  the  country.  It  is 
the  boast  of  Switzerland  that  none  of  her 
industries  are  without  sufficient  agencies  for 
providing  the  requisite  special  study  and 
424 


Political  Problems  of  Europe 

training,  and  these  agencies  are  generally 
situated  near  the  local  centre  of  each  indus- 
try. There  are  preparatory  schools  for 
watch-making,  for  weaving,  for  wood-carv- 
ing, stone-cutting,  dress-making,  pottery  and 
toy-making,  as  well  as  many  schools  for 
women  for  domestic  training.  There  are 
schools  for  many  of  the  smaller  house  in- 
dustries, which  occupy  a  peculiar  place  in  the 
commercial  make-up  of  Switzerland. 

There  seems  to  me  little  room  to  question 
the  general  superiority  of  the  German  sys- 
tem of  education.  That  it  is  on  the  whole 
superior  to  the  systems  in  vogue  in  England 
or  the  other  countries  in  Europe  is,  I  think, 
generally  recognized.  That  in  some  of  its 
particulars  it  is  superior  to  our  own  system 
can,  I  believe,  be  readily  established.  These 
points  of  superiority  are  giving  the  German 
Empire  substantial  vantage-ground  in  its 
commercial  competition  with  the  world.  The 
plan  underlying  the  whole  educational  sys- 
tem there,  of  developing  each  individual  to  a 
point  of  the  highest  industrial  or  commercial 
efficiency,  gives  a  practical  trend  to  educa- 
tion which,  with  us,  is  not  paralleled. 

From  the  point  of  view  of  increasing  the 
industrial  efficiency  of  a  nation,  Germany 
has,  it  seems  to  me,  worked  out  some  features 
of  her  educational  system  in  a  way  distinctly 
superior  to  conditions  in  the  United  States 

425 


Business  and  Education 

or  any  other  country.  The  Germans  have 
reasoned  that  if  education  is  to  meet  the 
needs  of  a  wide  diversity  of  calHng,  it  must 
itself  be  adapted  to  the  diversified  needs  of 
the  men  who  are  to  be  educated.  It  is  not 
surprising  to  find  in  the  larger  German  cities 
a  fully  established  educational  system,  with 
all  the  ordinary  facilities  of  university  and 
technical  schools,  gymnasium,  preparatory 
and  day  schools,  all  excellently  conducted  and 
thoroughly  up  to  date  in  their  methods.  All 
that  one  would  expect  to  find  there.  The 
point  where  there  is  distinct  and  novel  su- 
periority is  in  the  completeness  of  the  sys- 
tem of  evening  schools  of  the  several  classes 
and  the  provision  for  trade  schools.  No 
German  youth  need  go  without  either  a  gen- 
eral or  a  technical  education,  no  matter  what 
his  circumstances.  For  those  who  leave 
school  after  the  age  of  compulsory  attendance 
is  past,  there  are  evening  schools  for  general 
education  and  trade  and  technical  schools 
of  the  widest  diversity  of  scope.  Whatever 
trade  a  German  youth  may  pursue  he  will 
find  open  to  him  evening  schools  in  which  he 
may  improve  himself  in  his  trade,  may 
strengthen  his  technical  knowledge  so  as  to 
fit  himself  for  a  higher  position,  and  at  the 
same  time  may  have  his  "  formative  power," 
as  the  Germans  call  it,  strengthened  and 
diversified. 

426 


Political  Problems  of  Europe 

This  is  the  underlying  idea  in  the  whole 
German  educational  system:  first  of  all,  a 
certain  fundamental  set  of  subjects  well 
learned,  such  as  elementary  mathematics,  the 
German  language,  and  possibly  some  for- 
eign language;  after  that  the  opportunity, 
whatever  the  man's  circumstances,  to  im- 
prove himself  in  his  trade  and  in  his  general 
education,  either  in  a  day-school  or  in  a 
night-school.  In  other  words,  a  series  of 
schools  so  diversified  as  to  serve  the  interests 
of  every  class  in  the  national  population.  In 
Berlin  and  in  most  German  cities  these 
trade  schools,  such  as  those  for  shoemakers, 
tailors,  carpenters,  metal-workers,  masons, 
etc.,  have  been  conducted  with  very  friendly 
relations  with  the  unions ;  and  in  many  cases 
the  boards  of  inspection  have  upon  them 
members  of  the  trades-unions. 

The  perfection  of  this  plan  in  Germany 
comes  from  the  fact  that  the  direction  of  the 
State  departments  of  education  in  the  vari- 
ous German  states,  but  particularly  in  Prus- 
sia, has  been  for  many  years  in  the  hands  of 
very  able  men;  the  development,  for  in- 
stance, of  the  Berlin  system  of  evening 
schools,  begun  some  twenty  years  ago,  was 
carried  out  under  the  direction  of  the  best 
men  of  the  city. 

So  far  as  the  highest  institutions  for  tech- 
nical learning  are  concerned,  Germany  prob- 
427 


Business  and  Education 

ably  has  little,  if  any,  advantage  over  us, 
although,  in  certain  fields,  and  fields  of  great 
commercial  importance,  we  are  notably  de- 
ficient. That  is  particularly  true  in  the  field 
of  industrial  chemistry.  In  the  practical  ap- 
plication of  expert  chemical  knowledge  Ger- 
many leads  the  world  so  far  that  other 
nations  are  quite  outclassed,  and  the  reason 
for  that  must  be  found  in  the  superiority  of 
her  schools.  Germany's  prominence  in  that 
one  field  is  an  enormous  aid  to  her  in  gaining 
and  maintaining  her  industrial  leadership. 

Germany  is  a  land  of  small  salaries,  and 
we  are  supposed  to  be  ready  to  pay  more 
than  any  country  for  the  desirable  services 
of  any  man.  I  was  surprised,  therefore,  to 
learn  that  we  could  not  attract  some  of  the 
great  professors  of  industrial  chemistry  to 
our  own  institutions,  because  we  could  not 
pay  salaries  that  would  approach  the  sala- 
ries which  they  received  in  Germany.  In 
this  field  of  industrial  chemistry  there  has 
been  developed  close  relations  between  the 
academic  and  the  practical.  A  professor  of 
industrial  chemistry  in  one  of  the  great 
technical  schools  will  not  only  be  regarded 
as  a  leader  in  scientific  circles,  but  he  will  oc- 
cupy an  intimate  and  most  remunerative  re- 
lation toward  industrial  enterprises.  I  was 
told  that  the  professor  of  industrial  chem- 
istry  in  the  technical  high  school  of  Charlot- 
428 


Political  Problems  of  Europe 

tenburg  received  a  salary  of  $25,000  a  year. 
When  our  own  institutions  have  endeavored 
to  secure  men  of  this  type  from  Germany 
they  have  invariably  found  it  impossible  be- 
cause the  remuneration  there  was  more  than 
our  institutions  could  afford  to  pay.  The 
higher  remuneration  in  Germany  is  possible 
because  of  the  intimate  relation  which  has 
been  built  up  between  the  schools  and  the 
great  industries.  The  problems  which  came 
before  the  managers  of  these  industries  are 
laid  before  the  technical  schools,  and  the 
schools  are  well  paid  for  solutions  of  those 
problems.  Then,  in  turn,  industry  flourishes 
because  of  the  superior  methods  which  these 
technical  experts  invent. . 

It  is  not  my  purpose  to  attempt  anything 
like  a  complete  description  of  the  German 
system  of  education.  That  has  been  done 
many  times  by  observers  much  better  quali- 
fied. It  is  only  toward  some  phases  of  the 
situation  that  I  would  direct  attention,  and 
toward  some  of  the  features  which,  in  a 
casual  observation,  have  seemed  to  me  spe- 
cially interesting. 

In  primary  education  I  am  told  that  there 
are  two  principal  tendencies  characteristic 
of  the  development  of  the  curriculum 
throughout  Germany.  One  is  toward  the 
training  of  the  mental  perceptions,  the  power 
of  original  observation ;  the  other  is  in  the 
429 


Business  and  Education 

direction  of  the  development  of  oral  expres- 
sion. This  is  exactly  the  opposite  of  the 
tendency  in  French  education,  where  learn- 
ing by  rote,  memorizing  facts,  and  preparing 
to  pass  stereotyped  written  examinations  are 
the  order.  The  German  point  of  view  is 
that  pedagogy  is  a  scientific  branch  of  knowl- 
edge based  on  definite  laws  of  psychology, 
and  that  further  discoveries  are  being  made 
from  time  to  time  in  this  as  well  as  other 
sciences.  It  is  held,  therefore,  that  any  edu- 
cational system  which  rests  on  the  mechan- 
ical application  of  certain  methods  merely 
because  those  methods  have  long  served  a 
useful  purpose  is  as  foreordained  to  ineffi- 
ciency and  ultimate  failure  as  would  be  the 
doctor  or  chemist  who  declines  to  avail  him- 
self of  fresh  discoveries  of  modern  science. 
The  whole  system  of  education  in  Germany 
is  a  living  thing,  totally  unlike  the  system 
either  in  France  or  in  England. 

The  American  boy  who  had  to  endure  the 
regime  of  either  the  French  or  German 
schools,  would,  so  far  as  downright  hard 
work  is  concerned,  look  back  upon  his  home 
experience  as  being  almost  an  idle  holiday  in 
comparison.  In  the  elementary  schools  in 
Berlin  and  Charlottenburg,  and  I  presume 
elsewhere  in  the  empire,  the  schools  meet  at 
seven  o'clock  in  the  morning  in  summer  and 
at  eight  o'clock  in  winter.    The  habits  of  the 

430 


Political  Problems  of  Europe 

gymnasium  are  carried  into  the  classroom, 
and  great  attention  is  paid  to  pose  and  move- 
ment. Any  tendency  toward  slouching  is 
sharply  checked,  and  smartness  of  bearing 
is  carried  almost  to  an  extreme.  The  in- 
fluence of  the  army  is  already  felt  the  mo- 
ment the  boy  enters  his  first  class. 

One  feels  in  Germany  that  the  whole  na- 
tion is  at  school.  All  public  institutions 
make  special  provisions  for  school-children 
as  a  class.  Churches  have  reserved  seats 
for  them,  theatres  give  special  performances, 
and  railways  and  steamships  are  required  to 
give  special  rates  to  school-children  accom- 
panied by  their  teachers.  There  is  compul- 
sory education  for  children  from  six  to 
thirteen  years  of  age  in  the  country,  and 
from  six  to  fourteen  years  in  the  city.  Com- 
pulsory education  is  practically  fully  realized. 
The  average  daily  attendance  is  about  ninety 
per  cent  of  the  total  enrolment.  The  habit 
of  school  attendance  in  Germany  has  become 
almost  automatic.  Parents  are  fined  from 
one  penny  to  a  mark  a  day  for  every  day 
a  child  is  absent  without  a  proper  excuse, 
and  are  actually  imprisoned  if  the  fine  is  not 
immediately  paid. 

It  is  not  in  primary  education,  however, 
that  the  marked  superiority  of  the  German 
system,  in  its  effect  upon  the  industrial 
efficiency  of  the  nation,   offers  such  sharp 

431 


Business  and  Education 

comparison  to  the  conditions  in  other  coun- 
tries. It  is  in  the  industrial  education,  which 
beyond  question  is  one  of  the  most  powerful 
weapons  of  Germany  industry.  The  indus- 
trial schools  of  Germany  have  been  pictur- 
esquely described  as  the  '^  ironclads  "  of  com- 
merce. 

One  feature  of  industrial  education  which 
has  no  parallel  outside  of  Germany  is  the 
universal  provision  for  trade  schools.  Not 
only  are  many  of  these  founded  and  sup- 
ported by  the  State,  but  there  are  also  a 
great  many  maintained  by  local  guilds  and 
industrial  associations.  Our  own  labor  or- 
ganizations are  antagonistic  to  apprentices, 
and  look  with  no  favor  on  trade  schools. 
Labor  unions  are  not  strong  in  Germany,  but 
even  where  they  do  exist  their  attitude  to- 
ward education  is  not  only  friendly,  but 
actively  helpful  to  the  extent  of  contributing 
toward  the  support  of  trade  schools. 

These  trade  schools  offer  the  opportunity 
of  acquiring  a  technical  training  in  almost 
every  trade.  In  the  main  the  students  are 
already  active  workers  in  the  trade  in  which 
they  seek  a  higher  technical  knowledge.  In 
these  trade  schools  is  an  exposition  of  the 
most  modern  methods  of  work,  and  there  is 
shown  there  the  latest  development  in  ma- 
chines and  inventions.  The  teachers,  as  a 
rule,  have  a  good  preparatory  training  and 

432 


Political  Problems  of  Europe 

come  directly  from  the  trade  which  they  aim 
to  teach.  Frequently  they  work  at  the  trade 
during  the  day  and  teach  in  the  evening  and 
on  Sundays.  They  are,  therefore,  fresh  and 
thoroughly  up  to  date  in  their  practice.  A 
most  important  feature  of  these  trade  schools 
is  that  they  do  not  stop  at  the  purely  tech- 
nical side  of  the  trade,  but  seek  to  insure 
wise  business  management  by  including 
studies  which  prepare  the  student  for  the 
practical  conduct  of  the  business.  Side  by 
side  with  the  technical  training  are  given  the 
general  facts  of  production  and  consumption, 
of  cost  prices  and  market  values,  in  the  par- 
ticular trade  in  which  the  student  is  inter- 
ested. He  is  taught  bookkeeping  in  its  most 
practical  application  to  his  especial  business, 
and  is  made  familiar  with  the  legislation  of 
importance  to  his  particular  industry. 

These  trade  schools  ofifer  opportunity  not 
only  to  those  who  can  afford  to  substitute 
them  for  regular  school  work  of  a  more  aca- 
demic character,  but  they  are  specially  ar- 
ranged to  accommodate  students  who  must 
work  during  the  day.  It  strikes  one  rather 
oddly  to  find  how  generally  Sunday  is  given 
over  to  this  sort  of  instruction,  and  that 
thirty-five  per  cent  of  the  total  hours  of  in- 
struction in  the  industrial  schools  of  Saxony, 
for  instance,  fall  on  Sunday.  This  general 
devotion  of  Sunday  by  thousands  of  German 
28  433 


Business  and  Education 

youths  to  the  gaining  of  instruction  in  the 
scientific  and  technical  sides  of  their  chosen 
trades  contrasts  curiously  with  the  tremen- 
dous pother  which  is  going  on  in  England 
over  what  voice  the  Established  Church  will 
permit  the  non-conformists  to  have  in  the 
religious  instruction  which  forms  an  im- 
portant part  of  the  curriculum  of  every 
school  day,  for  that  practically  is  the  para- 
mount school  question  in  England. 

These  German  trade  schools  are  undoubt- 
edly having  an  enormous  effect  upon  the 
industrial  efficiency  of  the  whole  nation. 
They  are  designed  to  train  the  rank  and  file. 
It  is  in  the  great  high  schools  that  the  officers 
of  industry  are  trained. 

The  most  interesting  educational  move- 
ment in  Germany  to  me  is  the  development 
of  higher  commercial  education.  We  recog- 
nize that  an  engineer  or  a  mechanic  will 
profit  by  a  technical  education.  There  is 
no  longer  a  doubt  that  a  technical  education 
will  enable  such  a  man  to  outstrip  in  the  long 
run  his  fellows  who  have  equal  ability,  but 
have  learned  only  in  the  slower  and  less 
scientific  school  of  experience.  There  are  as 
good  reasons,  I  am  convinced,  for  giving  the 
banker  or  the  merchant  a  technical  commer- 
cial education.  The  schools  do  not  turn  out 
a  practical  engineer,  nor  will  they  turn  out 
a  practical  banker  or  merchant,  but  I  believe 

434 


Political  Problems  of  Europe 

that  there  is  a  great  amount  of  information 
needed  by  a  man  in  commercial  Hfe  which  is 
capable  of  scientific  classification,  and  can 
be  taught  with  much  greater  efficiency,  and 
with  much  less  loss  of  time,  in  a  properly 
organized  school  than  it  can  be  gathered  in 
the  ordinary  course  of  an  apprenticeship  in  a 
business  career. 

The  German  Handelshochschule,  or  com- 
mercial high  school,  is  not  a  parallel  to 
our  high  schools,  but  is  of  a  university  type. 
These  Handelshochschule  are  designed  for 
students  who  already  have  an  education 
equivalent  to  that  obtained  in  our  high 
schools,  or  perhaps  even  in  our  colleges,  and 
who  have  also  two  or  three  years  of  business 
practice.  The  scheme  of  these  schools  is  to 
educate  men  for  the  high  positions  in  com- 
mercial life.  They  are  not  for  ordinary 
clerks,  for  whom  an  ordinary  Handelshoch- 
schule offers  satisfactory  preparation. 

In  outlining  the  aim  and  work  a  professor 
in  one  of  these  schools  said  to  me : 

"  We  understand  perfectly  that  business 
men  must  be  trained  by  actual  practice,  but 
we  do  believe  that  a  good  theoretical  training 
and  the  formation  of  proper  habits  of 
thought  will  prepare  a  man  to  learn  quicker 
and  more  thoroughly  all  practical  work. 
From  the  experience  that  I  have  had,  I  be- 
lieve that  such  an  education  will  make  him 

435 


Business  and  Education 

at  the  age  of  twenty-five  more  advanced  in 
his  special  line  of  business  and  better  quali- 
fied to  handle  it  than  he  otherwise  would 
have  been  at  the  age  of  thirty.  Our  stu- 
dents get  a  good  deal  of  knowledge  regard- 
ing political  economy,  law,  languages,  etc., 
but  it  is  our  highest  claim  that  we  give  to  our 
men  the  independent,  exact,  inquiring,  re- 
searching spirit  of  German  scientific  workers 
at  a  time  when  they  are  young  enough  to 
apply  this  spirit  with  enthusiasm  to  the  busi- 
ness in  which  they  are  engaged.  That  is  the 
first  thing  we  set  out  to  teach  —  a  habit  of 
thinking  which  will  combine  general  prin- 
ciples with  exact  knowledge  of  details. 

"  There  are  two  lines  of  instruction  fol- 
lowed in  the  Handelshochschule,  a  general 
one  of  the  old  university  fashion  and  a  tech- 
nical one  of  new  organization.  The  general 
instruction  is  of  the  highest  university  stand- 
ard, and  is  given  by  university  men  at 
Cologne,  Frankfort,  and  Leipsic.  Generally 
the  students  of  the  Handelshochschtde  are 
entitled  to  follow  the  same  lectures  as  uni- 
versity students.  The  teachers  of  technical 
matters  are  new  men  in  a  new  line,  and  are 
naturally  not  altogether  satisfactory  at  the 
beginning.  There  is  much  difficulty  in  get- 
ting men  with  the  proper  training  for  the 
work  which  we  want  done,  but  I  believe  that 
we  shall  succeed  in  getting  good  faculties 

436 


Political  Problems  of  Europe 

who  can  give  thorough  instruction  in  prac- 
tical business  methods. 

"  The  technical  lines  of  instruction  in- 
clude accounting,  correspondence,  calcula- 
tions, and  languages.  I  think  American  ac- 
counting methods  are  more  advanced  for  the 
moment.  We  aim  to  teach  thoroughly  the 
mathematics  involved  in  arbitrage  and  ex- 
change operations,  and  in  connection  with 
business  finance  and  insurance.  Most  of 
the  instruction  is  by  lectures.  '  Learning  by 
doing '  seems  rather  inadequate  for  the  age 
of  our  men. 

''  Lectures  are  being  developed  on  the  tech- 
nology of  our  chief  industries,  now  partly 
done  at  Leipsic;  on  the  history  of  some  of 
the  leading  industrial  and  financial  institu- 
tions, now  partly  done  at  Cologne;  and  on 
the  practical  handling  of  duties  and  tariffs  of 
the  world.  In  economics  we  endeavor  to 
have  every  year  lectures  on  money,  banking, 
foreign  trade,  and  the  history  of  commerce 
and  banking.  All  of  these  lectures,  of  course, 
are  in  addition  to  the  regular  lectures  on 
theoretical  and  practical  economics,  gov- 
ernment finance,  and  statistics.  You  will 
find  in  these  schools  a  tendency  to  be  up  to 
date  in  facts,  and  to  care  less  for  the  details 
of  historical  development  than  most  Ger- 
man economists  do.  But  we  have  put  it 
down  as   strict  principle  not  to  make  any 

437 


Business  and  Education 

concessions  in  scientific  methods  and  exact 
thought.  We  ofTer  courses  in  commercial 
and  corporation  law  and  the  laws  relating 
to  bills  of  exchange  and  bankruptcy.  The 
courses  in  geography  are  particularly  varied. 
They  embrace  not  only  cartographical  facts, 
but  also  the  chief  products  of  different  coun- 
tries, the  transportation  systems,  etc.  We 
take  the  students  on  excursions  to  see  inter- 
esting plants.  At  Cologne  an  arrangement 
has  been  made  to  have  a  series  of  short  lec- 
tures by  business  men  and  secretaries  of  in- 
dustrial corporations. 

"  The  ordinary  course  which  we  favor  ex- 
tends over  two  years,  and  presupposes  a 
sound  preparatory  education.  A  new  habit 
of  thinking  and  a  fund  of  useful  knowledge 
—  that  is  what  we  aim  to  give  with  our  teach- 
ing. The  future  of  the  nation  depends  on 
men.  Men  are  the  greatest  economical  force. 
The  business  life  of  to-day  is  too  complicated 
to  allow  the  old-fashioned  apprenticeship, 
with  its  uncontrolled  routine,  to  form  the 
future  leaders.  The  extension  of  business 
relations  and  the  development  of  the  great 
industrial  organizations  demand  a  new  sys- 
tem of  commercial  education.  We  endeavor 
to  teach  what  those  young  men  who  expect 
to  be  commercial  leaders  will  need,  and  we 
are  fully  convinced  of  the  importance  of  this 
field  of  instruction." 

438 


Political  Problems  of  Europe 

The  Emperor,  whose  clear  vision  per- 
ceives the  beneficial  influence  of  industrial- 
ism on  the  national  strength,  employing  the 
increase  in  population  at  home,  instead  of 
forcing  it  to  emigrate,  and  by  so  employing 
it  adding  enormously  to  the  income  of  the 
nation,  is  sometimes  obliged  to  make  an 
almost  furtive  recognition  of  the  new  princes 
of  the  empire  so  that  he  may  avoid  offending 
prejudices  of  the  old  aristocracy.  Thus  an 
intimation  was  conveyed  to  the  American 
ambassador  in  Berlin  before  the  Emperor 
dined  with  him  in  February  that  his  Majesty 
would  like  to  have  among  the  guests  Herr 
Rathenau,  of  the  Allgemeine  Electricitats 
Gesellschaft,  the  great  electrical  company  of 
Germany;  Herr  Ballin,  of  the  Hamburg- 
American  Line;  and  Herr  Wiegand,  of  the 
North  German  Lloyd.  His  Majesty  desired 
to  talk  with  them  about  their  far-reaching 
enterprises,  each  employing  an  army  corps 
in  German  industrial  conquests  overseas. 
The  court  circular  issued  to  the  press  omitted 
mention  of  these  gentlemen  having  been 
present.  The  annual  emigration  from  Ger- 
many since  the  present  Emperor  began  to 
reign  has  declined,  roughly,  from  a  quarter 
of  a  million  yearly  to  one-tenth  of  that  num- 
ber. The  population  of  Germany,  increas- 
ing three  quarters  of  a  million  a  year,  has  so 
far  been  largely  occupied  at  home,  but  a 

439 


Business  and  Education 

speculative  problem  long  pressing  on  the 
attention  of  German  statesmen  is,  how  shall 
the  surplus  population  be  disposed  of  so  that 
it  may  be  retained  as  part  of  the  national 
strength  and  not  lose  its  identity  in  the 
United  States  or  other  new  non-German 
countries?  That  problem  has  so  far  found 
a  satisfactory  practical  solution  in  the  ex- 
pansion of  industry  and  the  increased  foreign 
trade.  The  pressure  of  population  on  the 
means  of  subsistence  must  increase,  and  will 
probably  enable  Germany  to  continue  rela- 
tively a  low-wage-paying  country.  The 
Government  surely  shows  the  highest  wis- 
dom in  shaping  the  educational  system  so  that 
every  citizen  is  trained  to  the  greatest  indus- 
trial or  commercial  efficiency,  and  taught  to 
make  the  most  of  the  rather  meagre  natural 
advantages  which  the  German  Empire 
possesses. 

The  Emperor  takes  the  greatest  interest  in 
the  whole  educational  system,  and  particu- 
larly in  the  technical  schools.  He  attends 
lectures  occasionally  at  Charlottenburg, 
sometimes  going  there  several  times  during 
the  season.  His  interest  manifested  in  this 
way  has  a  marked  influence. 

The  educational  system  of  Europe  cannot 
be  properly  considered  without  taking  into 
account  the  influence  of  the  army.  Prac- 
tically, every  able-bodied  man  on  the  Con- 
440 


Political  Problems  of  Europe 

tinent  of  Europe  has  been  moulded  by  this 
influence.  The  effect  of  the  army  training, 
coming  as  it  does  at  a  most  impressionable 
age,  is  enormous,  and  is  on  the  whole,  I  be- 
lieve, of  great  value.  Much  may  be  said 
about  the  great  cost  of  the  military  estab- 
lishments of  Europe,  but  there  is  undoubt- 
edly a  large  entry  to  be  made  on  the  other 
side  of  the  ledger  in  the  value  of  the  army 
training  to  the  young  man.  This  is  very 
generally  recognized  in  Europe.  Mothers 
part  with  their  sons  for  the  year  or  the  two 
years  of  army  experience  with  the  very  gen- 
eral belief  that  they  will  return  benefited 
by  that  experience.  The  mind  of  the  peas- 
ant boy  receives  its  first  great  awakening  in 
the  army  life.  He  travels  and  gains  knowl- 
edge in  many  ways.  In  Italy  and  France 
particularly,  the  army  is  used  as  a  means  of 
bringing  people  from  various  parts  of  the 
country  into  contact  with  each  other.  Men 
from  the  southern  provinces  are  quartered 
in  the  north  and  the  northern  men  are 
moved  to  the  south,  with  the  result  that 
there  is  a  far  better  national  understanding 
on  account  of  the  years  of  army  experience, 
and  a  distinct  strengthening  of  national 
unity. 

Observation  of  the  nature  and  effect  of 
the  various  systems  of  education  in  vogue 
in  Europe  cannot  but  lead  an  American  to 
441 


Business  and  Education 

the  conclusion  that  pre-eminence  in  industrial 
and  commercial  life  is  becoming  more  and 
more  closely  related  to  pre-eminence  in  edu- 
cational facilities.  Such  observation  would 
further  convince  one  that  more  emphasis  has 
been  placed  on  trade  and  technical  schools 
in  Germany  than  is  the  case  with  us.  We 
may  have  little  to  learn  from  the  educational 
systems  of  other  countries  than  Germany, 
but  from  the  standpoint  of  an  effective  aid 
to  industry  and  commerce  the  German  sys- 
tem presents  points  of  superiority.  We  need 
more  trade  schools,  more  technical  schools, 
and  far  better  equipped  institutions  for 
higher  commercial  education.  We  are  turn- 
ing out  quite  enough  men  who  attempt  to 
make  a  living  as  lawyers  and  doctors.  With 
great  advantages  we  could  shift  some  of  that 
energy  into  other  channels.  If  we  build 
schools  where  every  boy  who  is  at  work  at 
a  trade  can  learn,  under  competent  masters, 
the  scientific  and  technical  side  of  his  work, 
we  shall  have  done  something  of  vast  impor- 
tance for  the  development  of  national  great- 
ness. If  we  organize  a  system  of  higher 
commercial  education  which  will  give  as 
superior  equipment  to  our  business  men  as 
our  great  institutions  of  technology  now 
give  to  our  engineers,  we  shall  have  done 
much  to  give  permanence  and  world  scope 
to  our  commerce.  Until  we  have  done  all 
443 


Political  Problems  of  Europe 

that  we  shall  have  shown  ourselves  less 
awake  than  is  the  German  nation  to  the  aid 
which  education  can  give  to  industry  and 
commerce. 


V.    Paternalism  and  Nationalism 

In  any  examination  of  European  political 
and  economic  institutions,  the  attention  of  an 
American  would  at  once  be  attracted  to  the 
subject  of  workingmen's  insurance.  He 
would  find  it  a  subject  not  only  of  great 
importance  in  European  political  and  social 
life,  but  one  presenting  to  him  novel  consid- 
erations, because  the  institution  is  practically 
without  parallel  of  any  sort  in  this  country. 
Nothing  that  I  have  seen  in  Europe  has  in- 
terested me  more  than  the  effect  of  working- 
men's  insurance.  On  the  Continent  one 
finds  it,  measured  from  any  point  of  view, 
one  of  the  most  important  subjects  that  is 
presented  in  the  whole  array  of  affairs.  As 
a  rule,  I  think  Americans  have  little  concep- 
tion of  the  extent  to  which  the  system  has 
developed,  and  of  the  marked  effect  which 
it  is  producing  upon  national  economy  and 
upon  social  conditions. 

Workingmen's  insurance  conducted  as  a 
government,  or  semigovernment  institution, 
is  confined  to  the  Continent.  In  Great  Bri- 
tain there  is  no  government  activity  in  this 

443 


Business  and  Education 

field,  the  development  there  being  wholly 
within  the  ranks  of  the  friendly  societies,  or 
else  in  the  direction  of  the  provisions  which 
are  made  by  the  great  railway  corporations 
for  retiring  on  part  pay  their  superannuated 
servants.  The  weight  of  political  sentiment 
in  Great  Britain  is  violently  opposed  to  the 
adoption  by  the  Government  of  any  position 
which  might  lead  to  national  responsibility 
for  workingmen's  pensions.  On  the  other 
hand,  in  the  ranks  of  the  workingmen,  and 
particularly  in  organized  labor,  there  is  a 
growing  disposition  to  force  the  question 
upon  the  attention  of  Parliament. 

It  is  on  the  Continent  that  we  find  the 
governments  intimately  related  to  the  sub- 
ject of  workingmen's  insurance.  There  has 
been  an  interesting  development  of  semi- 
public  semi-government  insurance  institu- 
tions in  Germany,  France,  Italy,  Austria- 
Hungary,  Belgium,  Sweden,  and  Denmark, 
and  in  all  of  those  countries  the  movement 
has  assumed  proportions  of  political  impor- 
tance, and  the  workings  of  the  systems  have 
already  produced  marked  sociological  effect. 

It  is  in  Germany  that  there  is  to  be  found, 
by  all  odds,  the  highest  evolution  of  work- 
ingmen's insurance.  In  that  country  a  so- 
cial experiment  has  been  conducted  on  a 
vast  scale,  and  I  think  the  movement  may 
fairly  be  said  to  mark  the  most  interesting 

444 


Political  Problems  of  Europe 

recent  social  legislation  that  is  to  be  found 
anywhere  in  the  world. 

The  significance  of  the  movement  in  Ger- 
many will  be  better  understood  when  it  is 
noted  that  17,000,000  German  workmen  are 
contributing  to  and  enjoying  the  benefits  of 
the  pension  system.  That  significance  is  em- 
phasized when  we  learn  that  since  the  in- 
ception of  the  system,  in  1885,  the  total 
receipts  have  reached  $1,750,000,000.  At  the 
present  time  the  annual  receipts  are  in  ex- 
cess of  $130,000,000,  an  amount  sufficient 
to  make  us  consider  with  much  interest  the 
economic  consequences  of  the  plan. 

Especially  is  it  noteworthy  to  find  that 
this  vast  sum  has  been  administered  with 
absolute  integrity.  The  administration  of 
the  insurance  funds  of  Germany  offers  one 
of  the  best  indications  in  the  world  to-day 
of  the  possibility  of  a  successful  State  con- 
trol of  important  institutions,  even  when 
enormous  sums  of  money  are  involved.  The 
demonstration,  however,  has  more  than  in- 
tegrity to  its  credit.  The  collection  and 
disbursement  of  these  great  funds  have  been 
carried  on  with  an  economy  which  is  ad- 
mirable. In  considering  the  cost  of  admin- 
istration of  the  German  insurance  funds  it 
should  be  remembered  that  collections  are 
made  from  17,000,000  individuals,  as  well 
as  from  the  employers  of  those  individuals, 

445 


Business  and  Education 

and  that  in  making  disbursements,  particu- 
larly of  the  sick  and  accident  funds,  there 
is  a  care  and  intelligent  supervision  exer- 
cised which  must  make  the  cost  of  disburse- 
ment quite  as  great  as  the  cost  of  collection. 
There  are,  therefore,  reasons  for  a  much 
higher  ratio  of  expenses  than  would  be  es- 
sential in  such  a  system  of  life  insurance  as 
we  have  in  America.  But,  as  a  matter  of 
fact,  the  cost  of  Administration  of  American 
insurance  funds  makes  sorry  comparison 
with  the  expense  of  administration  in  Ger- 
many. It  is  a  monument  to  the  economy 
of  the  German  administration  to  find  that 
less  than  eight  and  one-half  per  cent  of  the 
total  income  is  used  up  in  the  cost  of  ad- 
ministration, and  that  ninety-one  and  one- 
half  per  cent  is  paid  out  in  benefits  to  the 
insured.  A  showing  like  this,  so  greatly  in 
favor,  apparently,  of  the  economy  of  gov- 
ernment administration,  would  seem  to  raise 
the  inquiry  as  to  whether  Germany  has  not 
found  a  better  plan  for  the  administration  of 
insurance  funds  than  we  have  evolved  in  this 
country. 

Nothing  like  a  full  consideration  of  the 
subject  of  workingmen's  insurance  is  to  be 
given  in  the  space  here  available.  I  be- 
lieve it  is  a  subject  worthy  of  the  deepest 
consideration.  Certainly  it  is  one  that 
offers  many  difficulties  before  a  clear  con- 
446 


Political  Problems  of  Europe 

elusion  can  be  reaehed  as  to  its  effeet  and 
advisability.  There  are  arguments  of  great 
weight  on  both  sides  of  the  subject.  I  be- 
lieve, however,  that  it  is  a  subject  which  in 
due  time  will  come  before  us  in  America  for 
consideration  and  action. 

Any  exposition  of  even  the  German  sys- 
tem of  insurance  alone  is  too  complicated 
to  be  presented  in  a  brief  study  of  the  sub- 
ject. The  system  in  Germany  is  an  evolu- 
tion, and  in  its  present  form  probably  none 
of  its  friends  would  suggest  that  it  is  an 
ideal  system.  Anything  like  a  complete  un- 
derstanding of  its  provisions  is  complicated 
by  the  fact  that  there  are  three  distinct 
forms  of  insurance  —  insurance  against  sick- 
ness, against  accident,  and  insurance  to  pro- 
vide old-age  pensions.  An  explanation  of 
the  system  is  further  complicated  by  the 
fact  that  the  administration  of  these  three 
distinct  and  separate  insurance  funds  is  in 
many  different  hands,  although  all  are  un- 
der the  supervision  of  the  general  Govern- 
ment. The  sick  insurance  fund  is  admin- 
istered by  more  than  23,000  sick  clubs.  The 
accident  insurance  is  administered  by  nearly 
five  hundred  managing  boards,  which  repre- 
sent various  State  and  municipal  communi- 
ties and  various  trades  and  industries.  The 
old-age  pension  system  is  in  the  hands  of 
some   thirty-one   distinct   insurance   institu- 

447 


Business  and  Education 

tions.  An  understanding  of  the  details  of 
German  insurance  administration  is,  there- 
fore, difficult;  but  some  general  considera- 
tions of  its  provisions  and  effects  are  easily 
possible.  All  the  insurance  funds  are  con- 
tributed to  in  about  equal  proportion  by 
employers  and  by  the  insured,  and  that  total 
is  augmented  by  a  subsidy  from  the  Empire. 
Employers  pay  in  about  forty-seven  per  cent 
of  the  total,  the  workingmen  less  than  forty- 
six  per  cent,  while  the  subsidy  from  the  Gov- 
ernment provides  between  seven  per  cent 
and  eight  per  cent. 

The  effect  of  the  institution,  as  seen  in 
Germany,  is  of  far  wider  significance  than 
are  merely  the  admirable  efforts  in  alleviat- 
ing distress  caused  by  sickness,  by  accident, 
or  by  poverty  in  old  age.  The  results  which 
have  been  attained  in  the  accident  insurance 
field,  for  example,  are  far  broader  than  the 
mere  indemnification  in  some  measure  for 
the  suffering  and  loss  which  accidents  have 
entailed,  and  it  is  likewise  true  in  the  other 
branches  that  the  provision  which  has  been 
made  for  the  payment  of  pensions  in  lieu  of 
wages  lost  in  case  of  sickness  has  been  only 
a  part,  and  one  might  say  almost  a  minor 
part,  of  what  has  been  accomplished  in  that 
field. 

The  results  of  the  German  workingmen's 
insurance    embrace    considerations    of    the 

44S 


Political  Problems  of  Europe 

deepest  sociological  consequences,  on  the  one 
hand,  and  of  a  most  significant  effect  on  the 
national  health  and  physique,  on  the  other. 
The  Germans  have  gone  at  the  whole  subject 
with  their  characteristic  thoroughness,  and 
the  whole  world  will  in  time  be  forced  to 
give  attention  to  what  is  being  accomplished. 
The  German  system  of  workingmen's 
insurance  is  founded  on  a  very  general  be- 
lief that  the  change  which  has  been  going 
on  in  Germany,  transforming  that  country 
from  an  agricultural  into  an  industrial  State, 
and  the  evolution  which  has  been  proceeding 
in  industry,  resulting  in  a  great  specialization 
of  work  and  the  high  development  of  the 
factory  system,  have  made  necessary  an 
enunciation  of  some  new  principles  in  regard 
to  the  duty  of  the  community  toward  the 
individual,  principles  which  are  fundamental 
in  their  character.  The  intricate  and  com- 
plicated modern  system  of  industry  has  left 
the  industrial  population  economically  de- 
pendent, no  matter  how  free  it  may  be  polit- 
ically, the  Germans  argue,  and  the  develop- 
ment of  that  system  has  brought  the  indus- 
trial population  into  a  position  where  it  is 
difficult  for  the  individual  to  extricate  him- 
self from  his  misfortunes  should  he  be  over- 
taken by  accident,  sickness,  or  old  age.  In 
this  new  industrial  order  the  liability  to  ac- 
cident is  greatly  increased,  and  new  means 
29  449 


Business  and  Education 

for  meeting  the  condition  which  that  fact  has 
brought  about  are  demanded. 

Various  nations  have  recognized  the  in- 
creased habihty  to  accident  which  has  come 
with  the  present-day  development  of  indus- 
try, and  have  taken  diverse  means  to  meet 
the  new  condition.  Germany  offers  the  most 
notable  example  of  a  development  of  acci- 
dent insurance.  France,  on  the  other  hand, 
has  undertaken  to  meet  the  demands  which 
industrial  workers  make  for  some  adequate 
provision  for  indemnity  by  passing  most 
rigid  and  far-reaching  legislation,  fixing 
upon  the  employer  the  liability  and  making 
provision  so  that  the  injured  workingman 
may  easily  enforce  that  liability  in  the  courts. 

In  America  there  not  only  has  been  little 
legislation  passed  on  this  subject,  based  on 
broad  principles  of  humanity,  such  as  have 
actuated  the  German  legislation,  but  there 
has  been  little  progress  toward  more  defi- 
nitely fixing  the  liability  of  the  employer, 
and  making  it  easy  for  the  injured  person 
to  enforce  a  claim.  Instead  of  that,  there 
has  arisen  here  a  system  of  so-called  em- 
ployers' liability  insurance,  which  are  in  ef- 
fect organizations  of  strength  with  which  to 
combat  weakness,  organizations  the  object 
of  which  is  not  to  indemnify  the  worker  for 
injuries,  but  rather  to  indemnify  the  em- 
ployer for  the  cost  of  fighting  in  the  courts 

450 


Political  Problems  of  Europe 

the  claims  of  the  injured  persons.  The  pur- 
pose of  this  system  is  not  to  put  the  insurance 
company  in  the  position  of  a  fair  employer 
who  will  make  payment  of  a  just  indemnity. 
Its  purpose  is  accomplished  rather  by  fight- 
ing each  individual  case  with  all  the  skill 
which  its  organization,  made  up  of  experi- 
enced adjusters  and  sharp  attorneys,  en- 
ables it  to  pit  against  the  feeble  efforts  of  an 
injured  workingman  who  is  attempting  to 
enforce  even  the  inadequate  legal  rights  that 
our  legislation  has  thus  far  accorded  him. 
If  statistics  w^ere  presented  dividing  the  re- 
ceipts of  these  insurance  organizations  so  as 
to  show  what  amount  they  expended  in  actu- 
ally paying  indemnity  to  injured  persons, 
and  what  amount  they  used  in  fighting 
claims  and  paying  dividends,  the  comparison 
which  those  figures  would  make  with  the 
humane  institution  of  accident  insurance  as 
developed  in  Germany  would  be  anything 
but  to  our  credit. 

Germany  has  accomplished  most  admir- 
able results  in  the  way  of  providing  indem- 
nity to  persons  injured  in  industrial  occupa- 
tions. The  work  accomplished  by  accident 
insurance,  however,  has  been  of  far  wider 
usefulness.  Accident  insurance  as  devel- 
oped in  Germany  has  really  been  an  insur- 
ance against  accident,  not  merely  the  pro- 
viding of  indemnity.    There  has  been  evolved 

451 


Business  and  Education 

there,  as  a  result  of  the  study  which  em- 
ployers and  employees  who  have  been  man- 
aging these  insurance  funds  have  given  to 
the  subject,  a  system  of  laws  and  of  reg- 
ulations providing  for  safeguards  which  have 
gone  far  to  reduce  the  number  of  accidents, 
and  to  remove  the  danger  from  industrial 
callings.  In  the  last  few  years  the  effect  of 
these  safeguards  has  been  to  reduce  one-half 
the  frequency  of  accidents.  Viewed  from  an 
economic  standpoint  alone  the  saving  which 
has  resulted  to  the  national  economy  has 
been  a  vast  sum.  In  the  United  States  we 
seem  as  extravagant  of  life  as  of  resources. 
There  is  no  single  line  in  our  national  statis- 
tics that  is  read  in  Europe  with  such  start- 
ling surprise  as  the  one  which  shows  60,000 
fatalities  and  injuries  on  our  railroads  in  a 
single  year.  In  other  industrial  fields  we 
are  as  careless  of  life.  It  seems  to  be  re- 
garded as  more  economical  to  fight  damage 
suits  than  to  provide  safeguards,  and  dan- 
gers that  do  not  interfere  with  dividends  fre- 
quently receive  little  attention. 

It  is  noteworthy  that  German  employers 
have  willingly  accepted  the  burden  they  are 
charged  with  on  account  of  workingmen's 
insurance.  That  it  is  a  very  considerable 
burden  there  is  no  denying.  The  Krupp 
Steel  Works  alone,  for  example,  contrib- 
uted more  than  $2,000,000  for  the  purposes 
452 


Political  Problems  of  Europe 

of  workingmen's  insurance  within  the  period 
from  1885  to  1902.  The  amount  which 
employers  are  paying,  compared  with  the 
total  wages  paid,  is  showing  increases  as  the 
operations  are  extended  in  the  various  fields 
of  insurance.  The  actual  contributions  to 
the  insurance  fund  have,  too,  been  only  part 
of  the  expenses  that  the  administration  of 
the  insurance  laws  has  charged  the  employ- 
ers with,  because  they  have  been  forced  to 
spend  great  sums  of  money  for  providing 
safeguards  against  accident,  and  putting 
their  works  in  the  best  possible  hygienic  con- 
dition. The  general  disposition  among  em- 
ployers, so  far  as  I  have  observed,  however, 
is  to  regard  these  expenditures  as  having 
been  made  with  good  value  received,  because 
of  the  increased  efficiency  and  better  health 
of  their  workmen,  and  their  contentment 
and  fair  attitude  toward  capital. 

There  have  been  almost  as  great  indirect 
benefits  connected  with  the  administration 
of  the  sick  insurance  fund  as  has  been  the 
case  in  the  field  of  accident  insurance.  Re- 
markable results  have  been  attained  in  the 
prevention  of  the  spread  and  in  the  cure  of 
contagious  diseases.  The  sick  insurance 
administration  has  by  no  means  stopped 
at  the  point  of  giving  care  and  financial  aid 
in  cases  of  sickness.  More  and  more  its 
aim  has  been  to  seek,  with  the  utmost  en- 

453 


Business  and  Education 

ergy,  every  means  for  avoiding  the  disturb- 
ance in  the  v^age-earning  capacity  of  the 
workingmen  which  sickness  entails.  It  has 
sought  to  ascertain  the  principal  causes  of 
sickness,  and  to  combat  with  organized  and 
scientific  efforts  the  various  enemies  of  pub- 
lic health.  The  organs  of  the  workingmen's 
insurance  committees  have  done  a  great 
work  in  educating  the  people  in  hygiene, 
and  particularly  in  reducing  the  scourge  of 
pulmonary  diseases.  This  has  been  done 
through  prompt  and  effective  measures  of 
isolation  and  treatment,  and  in  directing 
special  attention  to  the  question  of  the  hy- 
giene of  w^orkingmen's  dwellings.  The  ad- 
ministration of  the  sick  insurance,  instead  of 
being  confined  to  rendering  assistance  to  the 
sick  and  the  invalid,  has  sought  to  cure  them, 
and  make  them  fully  capable  again  of  earn- 
ing their  former  livelihood.  In  the  develop- 
ment of  that  work  the  Germans  have 
characteristically  gone  to  the  very  founda- 
tion of  the  question,  and  are  doing  as  im- 
portant service  in  effectively  preventing 
sickness  as  they  are  in  curing  it  or  relieving 
the  distress  which  follows  from  it. 

The  effect  upon  the  general  level  of  the 
national  health  has  been  enormous.  In  the 
field  of  hygiene,  as  in  the  field  of  educa- 
tion, the  German  Government  seeks  to  make 
of  each  individual  the  most  effective  eco- 

454 


Political  Problems  of  Europe 

nomic  unit  it  is  possible  to  develop.  In 
doing  that,  the  aid  which  has  been  rendered 
by  the  direct  and  indirect  results  of  work- 
ingmen's  insurance  in  improving  the  physi- 
cal condition  and  increasing  the  power  of 
resistance  to  diseases,  and  in  promoting  the 
recovery  and  full  return  to  health  of  those 
who  are  ill,  has  been  beyond  all  calculation. 

There  is  one  phase  of  the  benefits  which 
workingmen's  insurance  in  Germany  has 
conferred  that  is  not  to  be  measured  by 
statistics  nor  weighed  with  exactness  by 
definite  evidence,  but  it  is,  nevertheless,  one 
of  the  most  noteworthy  of  all  the  influences 
that  have  grown  out  of  this  great  social  ex- 
periment. There  has  been  accomplished  a 
service  of  the  very  first  importance  in  the 
direction  of  bringing  about  more  harmoni- 
ous relations  between  employers  and  em- 
ployees. There  is  growing  to  be  a  better 
and  better  mutual  understanding  between 
capital  and  labor,  and  the  administration 
of  these  insurance  funds  has  furnished  a 
common  ground  upon  which  the  two  inter- 
ests can  meet  and  discuss  those  questions 
which  affect  both.  The  committees  that 
have  the  administration  of  all  the  details  of 
the  collection  and  expenditure  of  these  great 
funds  are  made  up  in  part  of  employers  and 
in  part  of  workingmen.  In  serving  on  these 
committees,    employers    are    brought    to    a 

455 


Business  and  Education 

better  understanding  of  and  a  closer  sympa- 
thy with  their  employees,  and  workingmen 
have  been  given  a  clearer  comprehension  of 
economic  possibilities  in  the  field  of  indus- 
try, and  have  come  better  to  understand  their 
employers'  point  of  view.  I  do  not  mean  to 
say  that  Germany  has  reached  a  millennium, 
and  that  there  is  complete  harmony  and 
understanding  between  capital  and  labor 
there,  but  I  do  feel  that  the  labor  situation 
offers  some  sharp  contrasts  to  conditions  in 
other  countries,  and  that  those  contrasts  are 
favorable  to  Germany.  I  have  frequently 
spoken  of  the  spirit  which  pervades  so  many 
of  the  institutions  of  Germany,  the  spirit  of 
making  each  individual  member  of  the  com- 
monwealth the  most  efficient  of  industrial 
and  economic  units.  That  spirit  has  accom- 
plished tremendous  industrial  results.  With 
an  educated  brain  and  a  well-developed  phy- 
sique, the  German  workingman  is  equipped 
to  secure  good  results,  and  when  there  is 
added  to  that  equipment  a  spirit  which  allows 
him  to  use  his  faculties  to  the  fullest  extent, 
he  makes  strikingly  favorable  contrast  to  the 
English  trades-unionist,  with  his  ca'-canny 
proclivities,  and,  indeed,  to  some  of  our 
own  labor  union  members,  who,  working 
under  the  arbitrary  rules  which  their  unions 
have  laid  down,  give  for  a  day's  wages  not 
the  most  work  they  can  do,  but  the  least. 

456 


Political  Problems  of  Europe 

The  tendency  on  the  Continent  has  for 
a  number  of  years  been  in  the  direction  of 
higher  customs  tariffs.  That  tendency  has 
underlying  it  broad  influences.  The  first 
and  obvious  one  is  the  ever-increasing  ne- 
cessity for  added  revenues;  for  the  history 
of  the  budgets  of  nearly  every  European 
country  is  a  story  of  more  rapid  growth  in 
expenditures  than  those  countries  can  show 
in  the  totals  measuring  any  other  phase  of 
their  development.  Finance  ministers  have, 
with  hardly  an  exception,  been  under  the 
greatest  pressure  in  order  to  balance  the 
budget;  and  they  have  therefore  welcomed 
the  growing  spirit  of  nationalism  which  has 
permitted  them  to  lay  higher  and  higher 
duties  on  the  products  of  foreign  countries. 
One  of  the  most  general  characteristics  of 
European  development  in  the  present  gen- 
eration has  been  this  growth  of  nationalism 
—  this  intensifying  of  the  patriotic  spirit  — 
which  has  demanded  at  any  sacrifice  the  de- 
velopment of  national  resources. 

Germany  has,  of  course,  exhibited  this 
spirit  of  nationalism  in  its  most  intense 
form,  but  it  has  been  the  keynote  of  the 
political  life  throughout  Europe,  and  is  in 
sharp  contrast  with  the  spirit  of  unity  and 
universal  fraternity  which  earlier  in  the  cen- 
tury became,  for  a  time,  the  dominant  note. 

This  development  of  nationalism  has  fos- 

457 


Business  and  Education 

tered  a  belief  in  the  value  of  a  protective 
tariff,  and  that  belief  has  been  greatly 
strengthened  by  the  outlook  which  all  of  the 
European  countries  have  had  on  the  un- 
exampled development  of  the  United  States 
under  the  influence  of  protection.  In  Ger- 
many, the  necessities  of  the  Agrarians  nat- 
urally made  them  strongly  in  favor  of 
protection  for  the  products  of  the  land ;  while 
the  rise  of  industrialism  built  up  a  party 
representing  the  manufacturing  interests, 
the  members  of  which  were  as  keen  as  the 
Agrarians  for  protection,  although  they 
fought  the  advance  of  duties  which  meant 
dearer  food  at  the  same  time  that  they  were 
using  every  effort  to  have  a  tariff  schedule 
enforced  which  would  protect  them  against 
the  products  of  foreign  workshops.  An- 
other influence  in  Germany  has  been  the 
Kaiser's  intense  desire  to  build  up  a  navy, 
and  the  necessity  for  raising  great  revenues 
for  that  purpose.  The  history  of  the  tariff 
in  Germany  has  been  practically  a  succes- 
sion of  legislative  measures  increasing  cus- 
toms duties ;  and  while  these  measures  have 
been  fought  with  great  bitterness  by  the 
industrial  population,  and  particularly  by  the 
Social  Democrats,  the  several  influences 
favorable  to  an  advance  in  the  tariff  have 
been  almost  uniformly  effective,  and  the 
tariff  which  a  year  ago  was  successfully  put 

458 


Political  Problems  of  Europe 

through  the  Reichstag  and  is  now  awaiting 
the  conclusion  of  commercial  treaties  before 
its  general  application  by  the  executive  de- 
partments is  the  highest  which  any  Euro- 
pean country  has  yet  undertaken  to  put  in 
force. 

In  France  there  have  been  few  changes 
in  the  tariffs  for  many  years,  but  the  senti- 
ment is  overwhelmingly  in  favor  of  protec- 
tion, and  there  is  no  important  opposition  to 
the  high  duties  that  are  in  force.  In  addi- 
tion to  the  high  protective  duties,  there  has, 
indeed,  been  much  special  legislation  in 
France,  which  is  of  a  character  to  put  diffi- 
culties in  the  way  of  the  importation  of 
foreign  products  and  to  make  the  domestic 
market  more  secure  to  home  manufacturers. 
This  special  legislation  is  in  the  nature  of 
clauses  inserted  in  public  franchises,  which 
provide  that  the  public  utilities  built  under 
these  franchises  must  be  constructed  wholly 
from  material  produced  in  France.  This 
is  a  common  provision  in  franchises  for  elec- 
tric roads  and  gas  and  electric  lighting 
plants. 

That  same  spirit  is  notably  strong  in  Rus- 
sia, where  it  has  been  decreed  that  all  rail- 
road construction  must  be  carried  on  with 
rails  from  Russian  mills,  and,  generally,  that 
every  sort  of  material  used  in  the  building 
of  railroads  must  be  of  Russian  origin.    This 

459 


Business  and  Education 

was  the  economic  rock  that  Minister  Witte 
steered  against,  and  with  anything  but 
pleasant  results.  M.  Witte  was  the  strong- 
est of  protectionists.  He  not  only  believed 
in  high  protective  duties  against  almost  all 
foreign  importations,  but  he  encouraged  the 
Czar  to  sign  ukases  which  practically  pro- 
hibited the  importation  of  foreign  material 
for  use  in  public  works,  and  particularly  in 
railroad  construction.  The  result  of  that 
policy  was,  temporarily,  most  encouraging. 
Foreign  capital,  recognizing  the  vast  require- 
ments which  the  development  of  M.  Witte's 
plans  in  regard  to  the  Russian  railway  sys- 
tem contemplated,  was  induced  to  construct 
factories  on  an  extensive  scale.  The  disaster 
which  came  to  nearly  all  of  these  enterprises 
was  by  no  means,  however,  entirely  attribu- 
table to  faults  in  M.  Witte's  economic  pro- 
gramme. French  and  Belgian  promoters  in- 
duced small  capitalists  to  make,  in  the 
aggregate,  huge  investments  in  these  enter- 
prises, but  in  many  cases  the  promoters  had 
no  thought  beyond  reaping  the  largest  pos- 
sible profit  from  the  stock  subscriptions. 
There  were  companies  organized  which 
never  got  further  than  a  point  where  the 
promoters  divided  the  spoils. 

The  size  of  Russia  and  the  lack  of  public 
knowledge  regarding  conditions  there  made 
an  ideal  field  in  which  promoters  could  weave 
460 


Political  Problems  of  Europe 

fairy  tales  regarding  prospective  profits,  and 
the  catch  of  gudgeons  was  one  of  the  richest 
that  has  ever  been  known.  There  were, 
however,  many  legitimate  enterprises,  and, 
unfortunately,  some  of  these  at  the  end  did 
not  fare  much  better  for  the  investors  than 
those  where  the  promoters  never  took  the 
trouble  even  to  construct  the  factories  for 
which  they  raised  the  capital.  So  long  as 
railroad  building  went  forward  rapidly  and 
the  Government  could  afford  to  pay  the 
extremely  high  prices  which  the  domestic 
market  commanded,  the  legitimate  manu- 
facturing enterprises  thrived;  but  when 
the  development  of  new  public  w^orks  slack- 
ened the  factories  were  left  without  orders. 
Conditions  were  far  from  parallel  with 
those  during  the  early  industrial  develop- 
ment of  the  United  States,  and  that,  per- 
haps, was  one  of  the  miscalculations  that 
M.  Witte  made.  The  Russian  peasant 
population  is,  of  course,  in  no  wise  to 
be  compared  with  the  population  in  this 
country,  and  the  domestic  demand  for  the 
products  of  these  manufacturers  —  once 
the  Government  orders  failed  —  was  prac- 
tically nothing.  Statistics  of  Russia's  vast- 
ness  are  in  some  ways  most  deceiving.  It  is 
true  that  there  is  a  population  of  one  hun- 
dred and  forty  millions ;  but  if  that  popula- 
tion could  be  measured  by  some  comparative 
461 


Busi/ness  and  Education 

economic  unit,  so  that  its  productive  and 
consumptive  capacity  were  compared  v^ith 
such  individual  capacity  in  the  United  States, 
for  instance,  the  real  economic  value  of  that 
great  population  would  dwindle  in  a  most 
surprising  way.  Any  one  who  has  seen  Rus- 
sian peasant  life  in  the  "  mir,"  any  one  who 
has  seen  the  shelters  which  are  called  houses, 
looked  upon  the  decoction  of  black  bread  and 
cabbage  which,  with  an  occasional  supple- 
ment of  vodka,  forms  the  usual  food  of  the 
vast  population,  will  understand  what  a 
small  economic  value  must  be  put  on  each 
unit  of  Russian  population ;  and  that  makes 
it  easy  to  understand  the  complete  stagnation 
which  fell  upon  Russia's  new  industries, 
which  had  grown  up  under  the  intense  stimu- 
lus of  a  prohibitive  protection  and  were 
then  left  stranded  by  the  stoppage  of  Govern- 
ment orders. 

Trade  in  Europe  has  not  only  the  national 
difficulty  of  tariff  walls  to  surmount,  but  the 
free  interchange  of  commodities  is  greatly 
interfered  with  by  the  octroi  duties.  This 
form  of  taxation  is  general  in  France  and 
Italy,  and  is  found  to  some  extent  in  Swit- 
zerland, and  has  a  most  pronounced  effect 
upon  industrial  development.  The  tendency 
is  toward  abolishing  this  interference  with 
trade,  and  in  several  of  the  cities  of  France 
the  octroi  has  been  done  away  with.  It  is 
462 


Political  Problems  of  Europe 

still  in  force  in  Paris,  as  every  one  who  has 
even  crossed  the  city  lines  in  an  automobile, 
and  had  his  tank  of  gasoline  measured  when 
he  went  out  and  when  he  came  back,  will 
remember. 

Italy  is  a  land  of  high  tariffs  and  of  se- 
verely enforced  taxes,  but  in  some  sections 
there  is  being  shown  a  growing  liberalism 
in  the  administration  of  her  customs  affairs. 
That  country  has  adopted  from  us  the 
bonded-warehouse  idea,  and  has  expanded 
it  considerably  further  than  we  have.  There 
are  being  established  in  Italy  what  are 
known  as  free  customs  zones.  These  zones 
are  merely  bonded  customs  warehouses  on 
a  large  scale.  They  are  zones  into  which 
goods  may  be  freely  imported,  manufac- 
tured and  re-exported,  the  manufacturers 
being  permitted  to  erect  the  necessary  build- 
ings and  given  almost  complete  exemption 
from  custom-house  formalities  so  far  as  the 
goods  manufactured  there  are  re-exported 
to  foreign  countries.  All  food  consumed 
within  these  zones  must  pay  the  customs 
duties.  Such  a  zone  has  been  established  in 
Genoa,  and  it  is  proposed  to  develop  in  other 
seaports  —  especially  in  the  North  —  simi- 
lar free  zone  systems.  Manufacturers  in  the 
interior  whose  foreign  business  is  interfered 
with  by  this  plan  are  naturally  found  in  op- 
position to  it,  but  it  promises  to  be  success- 

463 


Business  and  Education 

ful  and  to  add  to  the  rapidly  growing  in- 
dustrial importance  of  northern  Italy. 

Not  many  people  in  the  United  States  are 
fully  aware  of  how  rapidly  Italy  is  advanc- 
ing in  industrial  importance.  In  some  ways 
northern  Italy  has,  in  the  last  ten  years, 
shown  as  promising  development  in  an  in- 
dustrial way  as  is  to  be  found  anywhere  in 
Europe.  Italian  industry  has  always  been 
handicapped  by  lack  of  fuel.  It  has  been 
difficult  to  compete  in  the  world's  markets, 
when  power  had  to  be  obtained  from  fuel 
imported  from  England ;  but  in  the  last  few^ 
years  Italy  has  been  rapidly  developing  the 
use  of  the  "  white  coal  "  from  the  peaks  of 
the  Alps  and  the  Apennines.  The  never- 
failing  water  supply  of  the  snow-topped 
mountains  is  being  utilized  by  the  electrical 
engineers  in  a  way  which  promises  to  con- 
vert northern  Italy  into  a  great  industrial 
state.  Nowhere  in  Europe  is  there  a  popula- 
tion better  fitted  to  aid  in  an  industrial  de- 
velopment. The  people  are  dexterous,  quick 
to  learn,  and  industrious,  and  up  to  the 
present  time  the  general  wage  scale  com- 
pares favorably  with  that  of  any  competitors 
which  they  have  to  meet.  The  result  of 
these  favorable  conditions  has  been,  for  in- 
stance, the  development  of  the  silk  industry 
at  a  rate  which  sounds  like  statistics  of  Amer- 
ican industrial  growth. 
464 


Political  Problems  of  Europe 

In  the  last  few  years  there  has  been  more 
or  less  agitation  in  Europe  over  the  proposal, 
which  had  its  origin  in  Austria,  for  the  for- 
mation of  a  European  customs  union,  a  plan 
aimed  particularly  at  the  United  States.  The 
difficulties  in  the  way  are  recognized  by  most 
statesmen  as  insurmountable,  but  the  idea 
is  a  dream  in  the  minds  of  some  who  harbor 
particular  antagonism  toward  the  growth  of 
our  commercial  interests.  European  states- 
men had  at  one  time  high  hopes  that  the 
United  States  would  agree  to  a  series  of 
reciprocity  treaties.  Seventeen  of  these 
reciprocity  measures  were  successfully  nego- 
tiated with  foreign  countries  and  have  now 
been  before  Congress  for  two  years  or  more. 
There  seems  to  be  not  the  slightest  prospect 
of  their  ratification,  nor  is  there  any  grow- 
ing disposition  favorable  to  them.  These 
treaties  would  be  of  immense  importance  to 
us,  as  well  as  to  the  European  nations  con- 
cerned; but  in  every  case  the  reduction  in 
the  tariff  on  goods  which  would  be  imported 
and  which  would,  to  some  extent,  come  into 
competition  with  goods  manufactured  in  a 
small  way  in  this  country,  has  led  Senators 
—  who  broadly  favor  the  reciprocity  prin- 
ciple—  to  protest  most  vigorously  against 
the  specific  possibility  of  injuring  some  pet 
industry  in  their  respective  States. 

The  treaty  which  was  negotiated  with 
30  465 


Business  and  Education 

France  was  regarded  by  Secretary  Hay  and 
the  Hon.  John  A.  Kasson,  who  assisted  in 
its  preparation,  as  the  most  favorable  to  the 
United  States  of  all  the  treaties  with  the 
leading  nations  of  Europe,  and  it  was  trans- 
mitted to  the  Senate,  backed  by  all  the  in- 
fluence at  the  command  of  the  Department 
of  State,  with  the  view  of  making  a  test  of 
whether  the  Senate  would  ratify  any  reci- 
procity treaty.  The  treaty  provided  for  a 
slight  reduction  in  the  tariff  on  knit  goods 
brought  into  this  country  from  France,  and 
the  result  of  that  was  that  a  Senator  from 
one  of  the  New  England  states  was  pre- 
pared to  go  to  any  length  to  defeat  the  treaty 
because  it  was  regarded  unfavorably  by 
small  manufacturers  in  his  state.  He  went 
to  other  members  of  the  Senate  who,  while 
not  especially  interested  in  the  French  treaty, 
were  opposed  to  the  ratification  of  the  treaty 
with  Germany,  perhaps,  and  made  trades 
by  which  they  would  mutually  assist  each 
other  in  defeating  all  of  the  treaties.  The 
State  Department  is  now  completely  dis- 
couraged and  the  disposition  is  to  make  no 
further  attempt  to  negotiate  reciprocity  trea- 
ties. This  has  been  particularly  annoying 
to  the  Germans,  who  have  come  pretty  gen- 
erally to  believe  that  the  United  States  has 
purposely  and  maliciously  discriminated 
against  German  goods.  There  is  probably 
466 


Political  Problems  of  Europe 

no  ground  for  this  opinion,  but  it  is  firmly 
fixed  in  the  minds  of  many  Germans,  and 
accounts,  in  some  measure  at  least,  for  the 
hostility  that  the  administrators  of  the  Ger- 
man tariff  have  shown  to  our  meats  and 
other  products. 

The  Germans  have  a  rather  more  scien- 
tific plan  for  preparing  a  customs  tariff  than 
we  have.  There  is  no  such  "  lobbying  "  with 
the  Reichstag  as  we  see  in  Washington ;  no 
such  pressure  brought  by  various  manufac- 
turing interests  against  individual  members, 
as  is  the  case  with  us.  There  is  a  system  of 
Boards  of  Trade  in  Germany  which  com- 
pletely covers  the  country,  and  which  forms 
a  medium  of  communication  between  the 
commercial  interests  and  the  legislative 
body.  These  Boards  of  Trade  are  semi- 
public  in  character;  and  when  a  measure 
such  as  the  tariff  is  under  discussion  the 
opinions  of  individuals  and  the  pressure  of 
interests  reach  the  Reichstag  in  the  main 
through  the  medium  of  the  Boards  of  Trade, 
and  after  having  been  carefully  sifted  by 
those  representatives  of  all  commercial 
interests. 

While  the  Governments  of  Europe  do 
much  to  hamper  the  free  movement  of  com- 
merce by  their  customs  tariffs,  they  have, 
on  the  other  hand,  done  much  to  foster  it 
by  the  care  which  they  have  given  to  the 
467 


Business  and  Education 

development  of  transportation  facilities. 
The  railroads,  to  a  greater  or  less  degree, 
are  controlled  by  the  state  in  nearly  all  of 
the  Continental  countries,  and  the  tendency 
on  the  Continent  is  distinctly  in  the  direc- 
tion of  more  complete  government  control. 
Switzerland,  by  the  Referendum,  has  re- 
cently decided  to  purchase  all  of  the  rail- 
roads in  the  country ;  Italy  is  contemplating 
an  extension  of  the  state's  activities  in  the 
field  of  transportation ;  in  Germany  there  is 
no  longer  any  debate  as  to  the  advisability  of 
the  state's  control  of  the  lines  of  transporta- 
tion, and  there  the  state  is  being  led  into 
almost  communistic  fields.  The  Govern- 
ment's interest  as  a  consumer  of  fuel,  in 
connection  with  the  operation  of  the  rail- 
roads, and  the  difficulties  which  it  met  with 
at  the  hands  of  the  coal  syndicate,  has  led  it 
into  purchasing  coal  mines  which  are  to  be 
operated  by  the  state ;  an  experiment  which 
pleases  the  Socialists  and  which,  if  success- 
ful, may  be  followed  by  others  of  the  same 
character. 

In  England  alone,  of  the  European  coun- 
tries, the  tendency  is  distinctly  away  from 
the  state  management  of  transportation  fa- 
cilities. England  has  had  more  experience 
than  any  other  country  with  the  municipal 
control  of  public  utilities,  and,  on  the  whole, 
the  experience  has  not  been  satisfactory. 
468 


Political  Problems  of  Europe 

English  taxes  in  some  instances  have  been 
increased  enormously  on  account  of  indus- 
trial undertakings  by  municipalities,  and  the 
result  is  a  revulsion  of  feeling  on  the  part  of 
a  great  mass  of  the  English  voters.  The 
English  railroads  have  always  been  con- 
trolled by  privately  managed  corporations 
organized  for  that  purpose,  but  they  do  not 
show  the  superiority,  as  compared  with  the 
state-controlled  roads  of  the  Continent, 
which  might  be  expected.  English  railroad 
managers  are  beginning  to  wake  up  a  little ; 
but,  compared  with  the  men  who  manage 
our  own  railroad  properties,  they  are  un- 
questionably deficient  in  practical  knowledge, 
and  they  make  a  very  sorry  contrast  so  far 
as  intensity  of  application  is  concerned.  The 
English  roadbeds  are  thoroughly  well  built, 
and  the  English  passenger  trains  are  able  to 
make  time  which  compare  favorably  with 
the  rate  of  railroad  travel  in  any  other  coun- 
try; but  when  it  comes  to  handling  freight, 
some  of  the  statistics  of  the  English  rail- 
roads are  ludicrous. 

A  friend  of  mine  was  standing  on  the 
towering  deck  of  the  Cedric  last  summer 
when  she  came  alongside  the  dock  at  Liver- 
pool. By  his  side  was  a  huge  Californian 
who  was  making  his  first  European  trip  and 
was  full  of  curiosity.  He  looked  far  down 
from  the  upper  deck  to  the  little  train  of 

469 


Business  and  Education 

coaches  that  was  waiting  to  carry  the  pas- 
sengers up  to  London,  and  asked  what  they 
might  be.  He  was  told  that  it  was  the  spe- 
cial train  to  London. 

"  Do  people  travel  in  those  things  here?  " 
the  big  Californian  said.  "  Why,  when  I 
was  a  boy,  I  used  to  play  with  trains  like 
that." 

The  comparison  was  not  inapt.  As  late 
as  the  year  1900,  the  average  freight-train 
load  in  England  was  but  fifty  tons;  that  is 
to  say,  the  average  train-load  was  only  equal 
to  the  capacity  of  one  of  our  modern  freight 
cars.  There  has  been  some  improvement 
since  then,  and  there  is  now  a  marked  tend- 
ency toward  heavier  equipment,  but  it  all 
seems  like  toy  equipment  when  compared 
with  our  own  heavy  trains. 

The  various  problems  of  transportation 
by  land  and  water  form  one  of  the  most 
important  groups  of  political  questions 
throughout  the  Continent.  In  Austria,  Ger- 
many, France,  and  Belgium  there  are  few 
more  important  political  matters  current 
than  those  affecting  transportation.  In  each 
of  those  countries  there  are  most  compre- 
hensive plans  in  hand  for  the  development  of 
the  canal  network,  and  each  nation  is  pre- 
pared to  spend  great  sums  of  money  in  per- 
fecting its  canal  system. 

While  the  famous  Kiel  Canal  was  in- 
470 


Political  Problems  of  Europe 

tended  primarily  for  strategic  purposes,  for 
enabling  the  German  navy  to  pass  easily 
from  the  Baltic  to  the  North  Sea  and  vice 
versa  in  time  of  war,  the  economic  impor- 
tance of  this  waterway  has  grown  from  year 
to  year  and  has  given  a  strong  impulse  to 
canal  building  in  Germany.  In  1899  the 
Dortmund-Ems  Canal,  connecting  the  great 
iron  and  coal  district  of  western  Germany 
with  the  North  Sea,  was  opened;  and  its 
traffic  has  developed  rapidly.  It  has  given 
the  coal  industry  access  to  Bremen,  Ham- 
burg, and  other  North  Sea  ports;  and  the 
iron  furnaces  in  the  west  have  found  it  of 
the  greatest  importance  to  them  for  bringing 
in  supplies  of  Swedish  ores.  In  the  summer 
of  1 90 1  the  Elbe-Trave  Canal,  a  large  water- 
way connecting  the  Elbe  with  the  Baltic  at 
Liibeck,  was  opened.  Its  importance  con- 
sists in  supplying  a  cheap  line  of  communi- 
cation between  the  many  manufacturing 
cities  along  the  Elbe  and  its  branches  and  all 
domestic  and  foreign  ports  on  the  Baltic. 
At  Berlin  the  Teltow  Canal  will  be  com- 
pleted this  year.  It  connects  the  Spree  above 
the  city  with  the  Havel  near  Potsdam,  and 
has  its  raison  d'etre  in  facilitating  through 
traffic  and  transforming  a  number  of  Ber- 
lin's suburbs  into  manufacturing  villages. 
These  last  three  canals  are  capable  of  accom- 
modating vessels  of  from  600  to  800  tons, 

471 


Business  and  Education 

and  are  thus  a  wide  departure  from  the  old 
canals  inherited  from  an  earlier  generation. 

The  most  important  canals  now  projected 
or  under  discussion  are  the  so-called  Mid- 
land Canal,  to  connect  the  Rhine  and  the 
Elbe;  the  enlargement  of  existing  canals; 
and  a  large  new  canal,  replacing  the  present 
antiquated  one,  between  Berlin  and  Stettin. 

Of  all  these  projects  by  far  the  most  im- 
portant and  at  the  same  time  most  promising 
is  the  Midland,  or  Rhine-Elbe  Canal.  It  has 
been  under  discussion  for  about  ten  years. 
Not  until  1899,  however,  did  it  take  definite 
shape  as  a  legislative  proposition.  At  that 
time  a  bill  for  its  construction  was  intro- 
duced into  the  Prussian  Diet  and  occasioned 
one  of  the  liveliest  political  struggles  that 
Germany  has  had  for  a  decade. 

The  chief  argument  for  the  canal  was,  of 
course,  that  it  would  give  cheap  transporta- 
tion from  the  great  coal  and  iron  centres  of 
the  Rhine-Westphalian  country,  to  all  of 
northeastern  Germany.  The  railways  had 
reached  the  limit  of  their  freight-carrying 
capacity,  and  the  building  of  new  ones  would 
be  very  expensive  through  the  highly  devel- 
oped country  traversed  by  them.  The  canal, 
however,  met  with  the  stoutest,  most  deter- 
mined opposition  from  the  powerful  Agra- 
rian element  in  the  Diet.  Their  chief  argu- 
ments against  it  were  two:  first,  its  great 
472 


Political  Problems  of  Europe 

cost,  and  second,  —  what  they  pressed  still 
more  earnestly,  —  the  possibility  that  it 
would  facilitate  the  importation  of  foreign 
grain  into  parts  of  Germany  not  now  acces- 
sible to  the  foreign  shippers.  These  were 
their  ostensible  arguments;  a  still  more 
powerful  one  was  not  mentioned  aloud  in 
the  debates :  the  conviction  that  the  canal 
would  promote  the  development  of  the  man- 
ufacturing and  commercial  interests  of  the 
countr}^  and  must  inevitably  tend  toward  in- 
creasing the  political  and  social  influence  of 
the  population  engaged  in  those  pursuits, 
while  the  power  and  influence  of  the  Agra- 
rian and  aristocratic  classes  must  necessarily 
be  diminished. 

The  first  canal  bill  was  thus  voted  down, 
after  its  enemies  had  come  forward  with 
many  other  schemes  of  a  more  or  less  local 
character,  which  they  sought  to  have  incor- 
porated into  it  as  "  compensations  "  to  their 
localities  for  whatever  damage  the  great 
canal  might  inflict  upon  them.  Neverthe- 
less, the  Government  did  not  give  up  its 
plan.  Herr  Thielen,  at  that  time  Prussian 
Minister  of  Public  Works,  announced  la- 
conically :  "  Built  it  shall  be,  for  all  that  " ; 
and  this  "  gebaut  wird  er  dock  "  has  become 
a  part  of  the  political  jargon  of  the  time. 

After  waiting  two  years  the  Government 
again  came  forward  with  its  canal  bill'^  but 

473 


Business  and  Education 

with  great  additions  to  it.  Not  only  was  the 
Midland  Canal  provided  for,  but  also  the 
eastern  connections  and  river  improvements 
mentioned  above.  The  Government  had 
adopted  the  policy  of  giving  "  compensa- 
tions " ;  but  even  that  did  not  placate  the 
Agrarians.  They  were  about  to  pass  an 
emasculated  bill  —  taking  the  eastern  im- 
provements, so  as  to  get  their  agricultural 
produce  shipped  cheaply  to  Berlin  and  other 
markets,  but  killing  the  Midland  Canal  en- 
tirely —  when  the  Government,  in  May, 
1 90 1,  put  an  end  to  the  wrangle  by  with- 
drawing its  bill  and  proroguing  the  Diet. 

Last  year  another  canal  bill  was  intro- 
duced in  the  Diet.  This  provided  only  for 
an  instalment  of  the  Midland  Canal,  namely, 
from  Bevergern  to  Hanover,  and  for  the 
eastern  improvements  already  described.  The 
Government  is  evidently  on  the  down-grade 
in  the  matter  of  making  concessions  to  the 
Agrarians.  Its  plea  for  the  passage  of  the 
original  canal  bill  of  1899  had  been  based 
partly  on  military  considerations,  like  facili- 
tating the  transportation  of  supplies  and 
munitions  of  war  to  the  west  —  France  is, 
of  course,  assumed  to  be  the  foe  —  but  now 
the  Government  throws  away  this  argument, 
and  is  willing  to  take  a  truncated  canal, 
which  of  itself  would  be  of  minor  importance. 
It  is  evidently  speculating,  however,  upon 

474 


Political  Problems  of  Europe 

more  favorable  political  conditions  in  future 
for  completing  the  canal. 

France  is  keenly  interested  in  a  compre- 
hensive project  for  perfecting  its  canal  sys- 
tem. The  French  Chamber  has  voted  credits 
of  one  hundred  and  fifty  million  francs 
which  will  be  spent  in  the  next  few  years  in 
repairing  and  enlarging  the  present  canals; 
and,  in  addition,  nearly  five  hundred  million 
francs  for  the  completion  of  new  canals. 
One  half  of  the  funds  is  to  be  supplied  by 
the  General  Government  and  the  other  half 
must  be  provided  by  the  district  benefited. 
The  plans  are  part  of  a  general  project  for 
making  a  system  of  waterways  throughout 
France  by  which  goods  can  be  carried  unin- 
terruptedly from  Basle  and  the  Rhine  to 
Orleans,  Paris,  and  the  seaports. 

Freight  and  passenger  rates  on  the  rail- 
ways in  Prussia  give  occasion  for  lively  dis- 
cussion. For  some  years  the  great  manufac- 
turers have  been  actively  working  for  a 
reduction  of  freight  rates  on  the  state  rail- 
ways. They  used  the  schedule  of  low  rates 
prevailing  on  the  American  roads  as  one  of 
their  best  arguments,  and  they  emphasize 
the  great  advantage  that  those  rates  give 
American  exporters  in  the  world's  markets 
as  an  obvious  reason  for  a  reduction  of  the 
German  rates. 

When    the    Prussian    Finance    Minister, 

475 


Business  and  Education 

Baron  von  Rheinbaben,  was  in  America,  he 
gave  close  attention  to  railway  matters,  and 
in  recent  debates  in  the  Prussian  Chamber 
he  gave  some  interesting  results  of  his  com- 
parison of  American  and  Prussian  railway 
conditions. 

The  state  roads  in  Prussia,  Baron  von 
Rheinbaben  argued,  are  compelled  to  charge 
higher  freight  rates  than  American  roads, 
because,  in  the  first  place,  the  initial  cost  of 
the  German  roads  was  much  greater  than 
the  American;  and,  in  the  second  place,  the 
American  roads  have  a  much  greater  vol- 
ume of  freight  to  move  in  bulk  than  do  the 
Prussian  railways,  and  they  also  have  the 
further  advantage  of  a  much  longer  average 
haul.  He  found  that  the  American  roads 
cost  to  build,  on  an  average,  about  sixty 
thousand  dollars  a  mile,  while  in  Germany 
the  cost  of  railroad  building  —  owing  chiefly 
to  the  higher  price  for  the  right-of-way  — 
was  nearly  one  hundred  thousand  dollars  a 
mile.  Baron  von  Rheinbaben  gave  it  as  his 
opinion  that  the  present  freight  rates  in 
America  were  largely  the  result  of  reckless 
rate  wars,  and  that  these  rate  wars  had  had 
such  a  disastrous  effect  upon  earnings  that 
the  average  return  upon  all  American  rail- 
way investments  is  less  than  two  per  cent. 
Where  there  is  no  competition  he  claims  that 
rates  are  fully  as  high  in  the  United  States 
476 


Political  Problems  of  Europe 

as  in  Germany,  and  he  also  asserted  that  the 
comparison  was  also  not  unfavorable  to  Ger- 
many when  the  freight  rates  on  all  goods 
of  the  higher  classes  were  compared.  It  was 
only  on  low-grade  bulky  shipments,  which 
could  be  carried  .  a  long  distance  without 
breaking  bulk,  that  he  found  the  rates  per 
ton  per  mile  distinctly  lower  than  in  Ger- 
many. He  also  claimed  that  the  American 
roads  made  up,  in  some  measure  at  least, 
for  their  lower  freight  rates  by  charging 
higher  rates  for  their  passenger  traffic,  and 
he  made  comparisons  which  were  favorable 
to  the  German  passenger  schedule. 

The  argument  of  the  German  commercial 
interests  for  lower  rates  in  order  to  assist 
manufacturers  in  their  export  business  and 
aid  them  in  their  battle  for  a  foothold  in  the 
outside  markets  has  caused  some  marked 
modifications  in  the  tariff  on  goods  for  ex- 
port. It  is,  of  course,  quite  impossible  for 
the  Government  to  satisfy  the  commercial 
interests  in  the  matter  of  rates,  and  the  report 
of  every  Chamber  of  Commerce  throughout 
the  empire  annually  devotes  some  pages  to 
arguments  and  recommendations  for  further 
reductions. 

Not  all  of  the  roads  in  Germany  are  under 
state  control,  but  it  seems  not  improbable 
that  the  state  will  eventually  operate. all  of 
the  lines.     No  charters   are  given   for  the 

477 


Business  and  Education 

building  of  roads  by  private  enterprise  that 
do  not  contain  the  proviso  that  they  may  be 
acquired  by  the  state  after  a  given  number 
of  years. 

While  we  are  inclined  to  criticise  English 
railroads  with  much  freedom,  they  have  a 
record  in  one  respect  which  our  own  railroad 
managers  must  look  upon  with  respect.  The 
gross  earnings  of  the  English  roads  never 
showed  an  unfavorable  fluctuation,  as  com- 
pared with  a  previous  year,  of  over  one  and 
one-half  per  cent.  With  all  the  talk  of  poor 
railway  management,  of  decadent  industries, 
and  of  the  economic  evils  of  war,  it  is  con- 
fusing to  find  that  the  commercial  develop- 
ment of  Great  Britain,  measured  by  her 
gross  railroad  trafiic,  presents  an  almost 
unbroken  record  of  advance.  Net  earnings, 
however,  have  been  badly  cut  into  by  the 
rise  in  wages  and  by  the  higher  cost  of  fuel. 


478 


THE  CURRENCY 

An   address   delivered   before   the   New  York    State 
Bankers'  Association,  July  5,  1906. 

A  COMFORTABLE  man  is  apt  to  be  an  opti- 
mist. A  prosperous  man  is  naturally  averse 
to  changes.  Such  a  man  is  likely  to  be  well 
satisfied  with  conditions  as  they  exist.  He 
looks  with  scepticism  upon  suggestions  that 
would  tend  to  bring  into  the  situation  new 
factors  or  new  conditions.  Bankers  as  a 
rule  are  regarded  as  typically  comfortable 
and  prosperous  citizens,  and  perhaps  it  is 
small  wonder  that  they  are  slow  to  recog- 
nize serious  defects  in  the  conditions  sur- 
rounding them.  At  least,  it  is  a  fact  that 
in  the  history  of  American  finance,  unless 
spurred  to  action  by  some  great  and  imme- 
diate necessity,  there  has  rarely  been  a  time 
when  bankers  have  given  effective  consider- 
ation to  questions  of  banking  or  currency. 

There  are  in  our  laws  few  important 
enactments  in  relation  to  money  that  have 
not  followed,  and  in  large  measure  been  the 
outgrowth  of,  some  financial  calamity.  The 
Bank  of  the  United  States  was  rechartered 
as  a  result  of  the  monetary  chaos  in  which 
the  country  found  itself  at  the  end  of  the 

479 


Business  and  Education 

War  of  1812.  The  existing  Sub-Treasury 
system  was  devised  because  state  banks 
allowed  their  notes  so  to  depreciate  that  the 
banks  became  unsafe  depositories  for  public 
funds.  The  Civil  War  was  responsible  for  the 
greenback  and  for  the  national  bank  note. 

In  financial  legislation  we  have  been  op- 
portunists. We  have  rarely  done  anything 
until  forced  to  do  it  by  misfortune.  It  is  not 
that  we  have  been  extraordinarily  conserva- 
tive, but  rather  that  we  have  been  inactive 
whenever  conditions  permitted  us  to  remain 
inactive.  If  financial  depression  or  panic 
pressed  us  to  a  point  where  legislation  became 
imperative,  we  then  legislated  with  more 
haste  than  wisdom. 

It  is  an  easy  and  natural  thing  for  a  banker 
in  these  days  of  prosperity  to  adopt  the  prin- 
ciple of  letting  well  enough  alone.  Such  a 
banker  may  say  that  the  growth  of  his  bank's 
deposits  and  the  size  of  his  stockholders' 
dividends  are  satisfactory,  and  therefore  he 
will  not  worry  himself  about  currency  legis- 
lation which  could  hardly  make  him  more 
prosperous  and  might  make  him  less.  A 
canvass  of  the  opinions  of  many  bankers 
might  leave  doubt  as  to  whether  or  not  there 
is  any  currency  problem.  Certainly  there  are 
many  successful  financiers  who  will  say  that 
there  is  not.  They  will  tell  you  that  we  have 
a  currency  as  good  as  gold ;  that  no  one  ever 


The  Currency 

has  to  consider  whether  one  note  is  better  or 
worse  than  another,  for  all  are  equally  cer- 
tain of  final  redemption  in  gold.  They  will 
tell  you  that  there  is  no  lack  of  currency  in 
a  country  which  has  been  able  to  increase  its 
gold  stock  in  ten  years  from  $500,000,000 
to  $1,475,000,000.  They  may  even  say  that 
there  is  not  much  indication  of  rigidity  in  a 
bank-note  system  where  the  volume  of  note- 
issues  has  risen  from  $215,000,000  to  $560,- 
000,000  in  the  same  ten  years.  So,  at  the 
start  of  any  discussion  of  the  currency,  we 
have  doubt  thrown  on  the  very  existence  of  a 
currency  problem.  We  must  first  examine 
the  question  as  to  whether  or  not  there  is 
any  need  at  all  for  the  discussion. 

A  physician  counting  the  pulse-beat  and 
taking  the  temperature  of  a  patient  may  fore- 
tell with  certainty  an  impending  crisis  in  the 
patient's  physical  welfare.  A  temperature 
of  103  and  a  corresponding  quickening  of  the 
pulse-beat  means  that  the  patient  is  in  dan- 
ger and  that  the  cause  of  that  danger  must 
be  removed,  or  sooner  or  later  serious  results 
may  ensue.  Let  me  tell  you  that  alternating 
periods  of  100  per  cent  and  2  per  cent  money 
in  Wall  Street  are  just  as  certain  indications 
of  a  deranged  financial  system  as  is  the  reg- 
ister of  103°  in  a  clinical  thermometer  a 
sure  indication  of  physical  disorder.  Serious 
results  may  not  immediately  follow  in  either 
31  481 


Business  and  Education 

case,  but  if  the  evidences  of  derangement 
repeatedly  recur,  it  is  only  a  question  of  time 
when,  in  both  instances,  unfortunate  results 
will  follow. 

The  physician  who  finds  the  pulse-beat  too 
rapid  does  not  necessarily  locate  the  difficulty 
in  the  wrist  of  the  patient,  for  the  reason 
that  it  is  there  he  finds  the  evidence  that 
something  is  wrong;  nor  would  there  be 
more  logic  in  saying  that  because  we  have 
seen  periods  of  lOO  per  cent  money  in  Wall 
Street,  the  seat  of  the  difficulty  must  be 
in  Wall  Street  and  the  remedy  should  be 
applied  there.  The  trouble  is  not  with  Wall 
Street;  it  is  fundamental  and  is  inherently 
related  to  our  unscientific  currency  laws. 

Periods  of  excessively  high  rates  for 
money,  recurring  seasons  of  stringency  fol- 
lowing each  demand  for  funds  with  which 
to'  move  the  crops,  other  periods  of  super- 
abundance, of  gorged  bank  vaults  and  in- 
terest rates  falling  to  a  point  where  the  return 
on  a  loan  is  hardly  worth  the  expense  of 
making  it,  —  all  these  things  are  significant 
signs  of  our  imperfect  financial  system. 
They  point,  I  believe,  with  absolute  certainty 
toward  .organic  weakness.  The  fundamental 
causes  which  lead  at  one  time  to  manifesta- 
tions of  high  rates  and  at  another  to  abnor- 
mally low  rates,  that  bring  periods  of  strin- 
gency followed  almost  in  a  day  by  periods  in 
482 


The  Currency 

which  funds  accumulate  more  rapidly  than 
they  can  be  wisely  employed,  —  the  funda- 
mental causes  of  such  changes  are  dangerous 
to  permanent  prosperity.  Just  as  surely  as 
temperature  and  pulse-beat  may  become 
physical  danger  signals  that  the  wise  man 
should  promptly  recognize,  just  so  surely 
we  are  receiving  periodical  warnings  in  the 
abnormal  register  of  the  pulse  of  Wall 
Street  money-rates,  and  in  the  alternating 
periods  of  currency  stringency  and  currency 
redundancy  that  may  be  observed  at  all  the 
money  centres. 

If  we  sit  smugly  by  and  say  that  we  are 
satisfied  with  the  measure  of  prosperity 
which  we  are  having,  and  that  we  think  we 
shall  go  on  very  well  with  things  as  they  are, 
then  sooner  or  later  we  shall  come  to  another 
period  that  is  not  satisfactory.  We  shall 
come  to  another  period  such  as  has  preceded 
the  enactment  of  most  of  the  important  ex- 
isting financial  legislation.  Then  we  are 
likely,  in  great  haste  and  with  little  consid- 
eration, to  enact  legislation  which  might  bet- 
ter be  undertaken  before  the  necessity  for  it 
becomes  painfully  evident. 

I  believe  there  is  the  gravest  need  for 
legislation  which  will  provide  a  scientific  sys- 
tem of  bank-note  currency.  I  believe  too 
that  there  is  no  group  of  men  upon'  which 
the  responsibility  for  such  legislation  lies  so 
483 


Business  and  Education 

heavily  as  it  does  upon  the  members  of  the 
New  York  State  Bankers'  Association.  Con- 
gress is  not  alone  to  blame  if  we  are  lacking 
in  wise  currency  laws.  If  financial  leaders 
are  utterly  oblivious  to  the  necessity  for  such 
laws,  if  bankers,  even  after  they  come  to  the 
conclusion  that  legislation  is  desirable,  are 
unable  to  reach  an  agreement  as  to  what  sort 
of  legislation  is  expedient,  it  is  with  poor 
grace  that  those  financial  leaders  and  those 
bankers  blame  Congress  for  failing  to  enact 
wise  laws. 

There  is  no  association  of  bankers  upon 
whom  the  responsibility  for  a  clear  under- 
standing of  the  currency  problem  falls  with 
so  much  force  as  it  does  upon  the  bankers 
of  New  York.  The  bankers  of  New  York 
will  hardly  deny  that  the  financial  centre  of 
the  country  is  there.  With  leadership  come 
grave  responsibilities. 

New  York  is  the  financial  centre.  New 
York  bankers  ought  to  accept  the  financial 
leadership.  They  ought  to  have  well-consid- 
ered opinions  upon  the  currency.  The  finan- 
cial portion  of  the  whole  country  looks  to 
New  York  for  this  leadership.  For  New 
York  bankers  to  say  that  anything  practical 
in  the  way  of  suggestions  must,  for  political 
reasons,  come  from  some  other  quarter,  is 
but  a  cheap  way  of  escaping  responsibility. 
For  the  financial  leaders  of  New  York  to 
484 


The  Currency 

say  that  the  popular  prejudice  against  Wall 
Street  is  so  great  as  to  prevent  their  voices 
being  effectively  heard,  and  that  it  is  useless 
for  them  to  devote  thought  to  a  problem  the 
solution  of  which  must,  because  of  political 
exigencies,  come  from  some  other  place,  is 
to  offer  but  lame  excuses  for  failure  to  do 
their  duty. 

I  believe  there  is  little  force  in  these  pro- 
testations behind  v^hich  New^  York  bankers 
modestly  step  into  the  background.  Their 
proper  place  is  at  the  front  in  a  currency 
discussion.  Financial  leaders  should  be 
leaders  in  fact;  although  in  truth  not  a 
fev^  of  them  have  given  less  earnest  con- 
sideration to  the  great  national  question 
of  the  currency  than  they  have  to  any  one 
of  dozens  of  corporate  underwritings  or 
reorganizations. 

I  believe  the  country  is  ready  to  accept  the 
leadership  of  Nev^  York  if  New  York  will 
accept  the  responsibilities  of  her  position.  If 
New  York  bankers  will  study  the  currency 
problem  until  they  are  ready  to  bring  forth 
a  plan  which  they  believe  is  the  best  for  the 
whole  country,  —  a  plan  which  is  not  narrow 
and  provincial,  a  plan  free  from  personal 
and  local  bias,  —  then  the  judgment  of  New 
York  bankers  will  be  received  by  the  .rest  of 
the  country  with  respect  and  consideration. 

If  the  officers  of  the  institutions  repre- 
485 


Business  and  Education 

sented  in  the  membership  of  the  New  York 
State  Bankers'  Association  will  reach  sub- 
stantial agreement  in  regard  to  what  consti- 
tutes the  currency  problem,  agreement  as 
to  what  are  the  principles  underlying  its 
correct  solution,  and  what  forms  of  legis- 
lative enactment  will  be  wise  from  the  point 
of  view  of  the  whole  country,  I  am  perfectly 
confident  that  the  whole  country  will  soon 
come  into  hearty  accord  with  that  opinion. 
The  principal  reason  that  New  York  has 
been  unable  to  influence  the  public  opinion 
of  the  country  on  financial  matters  has  been 
that  New  York  bankers  have  had  no  well- 
considered  conclusions.  They  have  not  ac- 
cepted the  responsibilities  of  leadership. 
They  have  failed  to  give  the  subject  the 
consideration  it  merits.  They  have  reached 
no  agreement  in  regard  to  the  course  which 
ought  to  be  followed. 

The  country  believes  that  when  there  is 
real  need  for  legislation  that  need  will  be 
recognized  by  the  leaders  of  finance.  If  the 
bankers  of  New  York  would  once  clearly 
recognize  the  need,  that  fact  alone  would  go 
a  long  way  toward  making  the  country  see 
the  necessity  for  action.  New  York  bankers 
may  think  it  is  easier  to  temporize,  but  the 
country  looks  to  New  York  in  this  instance 
to  accept  the  responsibilities  of  leadership. 
It  looks  to  New  York  to  recognize  the  neces- 
486 


The  Currency 

sity  for  legislation  if  urgency  exists.  It  ex- 
pects New  York  bankers  with  unanimity  to 
point  out  a  course  that,  with  the  welfare  of 
the  whole  country  in  mind,  will  be  the  wisest 
to  follow. 

If  financial  disaster  should  ever  come  be- 
cause we  have  failed  to  enact  proper  legis- 
lation, the  blame  for  that  disaster  will  lie 
against  the  bankers  of  New  York  more  di- 
rectly than  against  any  other  group  of  people. 
The  bankers  of  New  York,  more  than  any 
others,  have  a  duty  imposed  upon  them,  the 
duty  of  leadership.  They  cannot  escape  the 
responsibilities  of  leadership.  The  country 
will  some  day  understand  that  the  financial 
leaders  have  thus  far  failed  to  measure  up 
to  this  responsibility.  If  that  failure  ever 
stands  out  clearly  against  a  background  of 
financial  disturbance,  the  fact  will  not  be 
helpful  to  New  York's  pre-eminence. 

To  my  mind  we  are  in  a  lethargy  of  suc- 
cess. We  hear  paeans  of  prosperity  sweetly 
sung  on  every  side.  Unexampled  totals 
mark  the  measure  of  every  phase  of  indus- 
trial and  commercial  life.  We  have  engaged 
in  expenditures  of  capital  on  a  scale  so  vast 
that  it  makes  the  financial  operations  of  other 
days  seem  petty  by  comparison.  Labor  was 
never  before  so  fully  or  so  profitably  em- 
ployed. Business  was  never  more  active. 
And  so,  some  of  us  say,  there  surely  can  be 
487 


Business  and  Education 

nothing  wrong  with  a  situation  that  gives 
such  evidence  of  health  and  growth. 

Truly  it  is  a  magnificent  organization  of 
business  which  we  have.  With  the  health 
and  vigor  of  the  business  condition  impressed 
upon  us,  it  is  difficult  to  understand  that  an 
occasional  irregularity  of  the  financial  pulse- 
beat  may  be  an  important  warning.  The 
pulse-beat  of  abnormal  money-rates  in  Wall 
Street,  rates  that  are  abnormally  low  or 
abnormally  high,  have  recurred  and  passed, 
and  it  is  easy  to  believe  that  they  mean 
nothing  serious.  It  is,  perhaps,  hard  to  be- 
lieve that  a  brief  period  of  overflowing  bank 
vaults  might  in  the  end  work  toward  serious 
disorganization  of  this  magnificent  fabric  of 
business.  We  see  undue  accumulations  of 
currency  at  the  financial  centres;  we  see 
banks  that  must  pay  interest  on  these  swol- 
len deposits  reloan  the  money  with  nervous 
haste  at  any  return,  no  matter  how  low ;  we 
know  that  funds  in  this  way  may  some  day 
become  tied  up  so  that  there  may  be  the 
greatest  difficulty  in  liquidating  the  loans 
to  meet  an  unexpected  demand,  but  it  does 
not  seem  to  come  with  much  force  to  the 
average  banker  that  the  legitimate  result  of 
such  a  situation  may  be  financial  disaster. 

Even  though  a  clinical  thermometer  reg- 
isters a  degree  or  so  too  high  a  temperature, 
a  strong  man  may  think  it  a  matter  which 
488 


The  Currency 

in  his  strength  he  may  disregard,  and  so  the 
business  community  seems  to  rest  in  the 
security  of  an  all-pervading  prosperity  while 
the  vast  financial  work  of  the  day  continues 
to  be  performed  by  machinery  devised  two 
score  years  ago  to  fit  a  then  abnormal  situa- 
tion. The  free  and  normal  development  of 
our  banking  system  has  been  prevented  by 
prohibitions  which  had  their  birth  in  the 
financial  exigencies  of  the  Civil  War.  In 
every  other  field  of  activity  we  have  recog- 
nized that  new  conditions  made  new  machin- 
ery desirable,  but  the  machinery  of  banking 
has  not  been  permitted  to  develop  so  as  to 
keep  pace  with  the  growth  of  the  work  it  has 
to  do. 

With  the  increase  in  the  volume  of  busi- 
ness done  in  the  United  States,  and  with  the 
growth  of  the  value  of  the  annual  product 
of  soil  and  factories,  the  margin  between  the 
maximum  and  minimum  need  for  currency 
has  widened.  That  margin  between  the 
greatest  amount  of  currency  likely  to  be 
needed  at  one  period  and  the  least  amount 
likely  to  be  needed  at  another,  has  probably 
doubled  in  the  last  ten  or  fifteen  years  as  a 
result  of  our  development. 

At  the  present  time  there  is  reason  for  be- 
lieving that  the  country  at  certain  seasons 
requires  $150,000,000  more  currency  to 
transact  its  business  than  is  required  at  other 
489 


Business  and  Education 

seasons.  Now  remember  I  am  talking  of 
currency,  not  of  credit.  To  meet  this  fluctu- 
ating demand  for  currency  there  is  abso- 
lutely no  provision  in  our  laws.  Our  bank 
notes  increase  or  decrease  in  volume  as  a 
result  of  the  fluctuation  in  the  market  price 
of  Government  bonds,  and  there  is  practically 
no  relation  between  that  price  and  the  cur- 
rent demand  for  currency.  Our  banks  are 
permitted  to  give  freely  to  their  customers 
credits  in  the  shape  of  deposits,  but  when  a 
customer  wants  to  convert  that  credit  into 
the  form  of  a  circulating  note,  he  can  only 
be  accommodated  by  taking  from  the  vaults 
of  the  bank  its  reserve  money. 

I  believe  the  first  principle  to  recognize  is 
that  there  is  not  an  essential  difference  be- 
tween a  bank  credit  in  the  form  of  a  deposit 
and  a  bank  credit  in  the  form  of  currency. 
Certain  safeguards  must  be  thrown  around 
a  circulating  note  that  are  not  required  for 
the  protection  of  a  deposit,  but  with  that  ex- 
ception in  view,  this  principle  stands,  I  be- 
lieve, as  perhaps  the  most  important  one  to 
recognize  in  a  currency  discussion,  —  that 
there  is  not  an  essential  difference  between 
a  bank  note  and  a  bank  deposit,  and  that  the 
customer  of  a  bank  ought,  under  satisfac- 
tory safeguards,  to  be  able  to  convert  one 
into  the  other  at  will. 

One  other  principle  that  has  been  fatally 
490 


The  Currency 

lost  sight  of  in  half  the  discussions  of  the 
currency,  is  the  principle  that  adequate  re- 
demption facilities  are  a  certain  bar  to  an 
over-issue  of  circulating  notes.  People  talk 
of  the  country  being  flooded  with  an  asset 
currency.  With  adequate  redemption  facil- 
ities such  a  thing  is  inconceivable.  Let  any 
student  of  the  currency  question  keep  in  mind 
the  idea  of  providing  absolutely  adequate  re- 
demption facilities,  so  that  a  bank  note  will 
never  stay  in  circulation  a  day  beyond  the 
time  when  a  bank  credit  is  no  longer  pre- 
ferred in  that  form  rather  than  in  the  form 
of  a  deposit,  and  half  the  difficulties  of  the 
inquiry  are  at  once  cleared  away. 

This  is,  of  course,  no  place  for  a  thorough 
discussion  of  the  currency  question.  I  have 
no  plan  to  propose.  The  one  thing  that  I 
want  to  urge  is  the  importance  of  providing 
a  scientific  bank-note  currency  if  we  wish  an 
indefinite  continuance  of  prosperity,  and  fur- 
ther to  emphasize  the  responsibility  which 
rests  particularly  upon  the  bankers  of  New 
York  in  presenting  a  plan  for  such  a  cur- 
rency. The  plan  may  take  one  of  half  a 
dozen  forms.  Perhaps  the  best  one,  were  it 
politically  possible,  would  be  the  creation  of 
a  Government  bank  having  the  power  of 
issue,  whose  sole  business  would  be  in  its 
relations  with  other  banks  and  whose  chief 
operations  would  be  the  re-discounting  for 
491 


Business  and  Education 

other  banks.  I  do  not  mean  that  any  ex- 
isting institution  could  be  metamorphosed 
into  such  a  central  bank.  It  would  have  to 
be  freshly  organized  from  the  beginning,  its 
control  would  need  to  be  largely  in  the  hands 
of  the  Government,  and  its  ownership  widely 
distributed  among  banking  interests  through- 
out the  country.  The  principles  of  a  scien- 
tific asset  currency  could  well  be  worked  out 
through  the  medium  of  such  an  institution, 
as  the  experience  of  Germany  eloquently 
testifies,  but  they  can  undoubtedly  be  worked 
out  in  some  other  way. 

The  fear  which  men  so  commonly  have  of 
giving  a  larger  power  of  note-issue  to  small 
national  banks  will  largely  disappear  when 
the  opponents  of  asset  currency  have  once 
fairly  in  their  minds  what  the  result  will  be 
of  providing  adequate  redemption  facilities. 
That  a  plan  can  be  devised  which  will  safely 
permit  every  national  bank  to  issue  a  certain 
amount  of  notes  not  secured  by  Government 
bonds,  I  have  no  doubt,  and  I  am  inclined 
to  think  that  it  is  along  that  line  that  legis- 
lation is  most  likely  to  be  obtained,  although 
perhaps  it  is  not  the  ideal  solution. 

The  thing  of  which  I  am  absolutely  cer- 
tain, however,  is  that  a  solution  of  the  whole 
problem  could  be  attained  wisely,  promptly, 
and  easily  if  bankers  would  give  to  a  con- 
sideration of  the  subject  anything  like  the 
492 


The  Currency 

attention  which  it  merits.  And  again  I  say, 
the  responsibihty  is  on  the  bankers  of  New 
York.  You  cannot  hide  behind  Congress  to 
avoid  the  responsibihty.  You  cannot  shift 
the  responsibihty  to  the  shoulders  of  your 
associates  in  the  West.  You  are  the  finan- 
cial leaders,  and  the  responsibility  of  leader- 
ship is  yours. 


493 


BANKING    DEVELOPMENTS 

An  address  delivered  before  the  Illinois  Bankers' 
Association,  at  the  Louisiana  Purchase  Exposi- 
tion, St.  Louis,  October,  1904. 

It  has  seemed  to  me  especially  fitting  to 
attempt  to  review,  in  the  briefest  manner,  a 
few  of  the  figures  illustrative  of  our  material 
progress,  and  to  try  to  draw  some  deductions 
from  them.  In  order  to  get  a  setting  for  our 
comparisons,  let  us  for  a  moment  glance 
back  at  conditions  during  the  last  ten  years. 
We  will  remember  that  we  were,  ten  years 
ago,  just  emerging  from  the  depression  of 
the  panic  year  of  1893,  and  that  we  were 
facing  a  great  political  and  economic  con- 
flict over  the  silver  issue.  The  whole  world 
was  filled  with  distrust  in  regard  to  the  future 
of  our  standard  of  value,  and  the  chilling 
shadow  of  that  distrust  was  falling  heavily 
on  our  commerce  and  finances. 

Later  came  the  definite  verdict  of  the 
people,  declaring  for  a  sound  currency,  and 
following  that  began  an  unexampled  era  of 
prosperity  such  as  no  other  country,  in  any 
age,  has  ever  known.  The  expansion  went 
beyond  all  the  experiences  of  men  of  affairs. 
We  had  learned  lessons  of  economy,  of  care- 
494 


Banking  Developments 

ful  management,  and  of  cheap  production 
in  the  depression  which  followed  the  panic 
of  1893,  and  now  we  suddenly  wakened  to 
the  fact  that  we  had  obtained  a  grasp  on  the 
markets  of  the  world.  Our  exports  of  manu- 
factures ran  up  from  $183,000,000  to  $433,- 
000,000  in  half  a  dozen  years,  and  this  in- 
crease of  $250,000,000  in  the  annual  average 
of  our  exports  of  manufactured  products 
made  Europe  stand  aghast  at  what  was  de- 
nominated the  American  commercial  inva- 
sion. Our  general  foreign  trade  balance 
assumed  such  totals  as  to  cause  economists 
seriously  to  consider  what  was  to  happen  to 
the  rest  of  the  industrial  world  if  this  march 
of  progress  went  on.  In  half  a  dozen  years 
we  piled  up  against  other  countries  a  trade 
balance  in  our  favor  of  more  than  $2,600,- 
000,000,  —  a  trade  balance  far  larger  than 
the  net  trade  balance  had  been  from  the  be- 
ginning of  our  government  down  to  the  time 
when  this  remarkable  expansion  started. 

And  then  we  made  mistakes.  We  were 
in  the  midst  of  a  prosperity  so  great  that  it 
went  beyond  the  experience  of  the  most  ex- 
perienced. With  the  flood-tide  of  this  pros- 
perity covering  all  of  the  old  landmarks,  it 
was  small  wonder  that  there  were  blunders 
made  in  steering  the  craft  of  business.  We 
ran  into  excesses,  extravagances,  and  mis- 
calculations. Capital  made  mistakes  of  over- 
495 


Business  and  Education 

capitalization;  labor  made  mistakes  of  ar- 
bitrary and  unwise  demands;  everybody 
made  mistakes  of  extravagance.  Producers 
made  errors  in  estimating  the  demand,  and 
made  miscalculations  in  the  multiplication  of 
their  productive  capacity.  There  was  a  sur- 
plus demand  above  our  productive  capacity, 
and  that  demand  went  knocking  at  the  door 
of  first  one  factory,  then  another  and  an- 
other, producing  the  impression  on  the  mind 
of  each  individual  manufacturer  that  the 
demand  legitimately  pressing  upon  him  war- 
ranted him  in  doubling  his  plant ;  and  when 
every  one  started  to  double  his  productive 
capacity,  capacity  soon  ran  ahead  of  demand. 
The  railroads  were  caught  in  much  the 
same  situation.  They  made  huge  engage- 
ments for  expenditures  which  they  felt  were 
necessary  in  order  to  handle  the  traffic  that 
was  pressing  on  them.  For  the  time  being, 
far  too  great  a  portion  of  liquid  capital  was 
absorbed  into  fixed  forms  of  investment.  Di- 
rectly and  indirectly,  bank  credits  which  were 
payable  on  demand  were,  in  a  dangerous 
proportion,  converted  into  new  manufactur- 
ing plants  and  into  new  railroads,  tracks, 
equipment,  and  terminals.  Bank  reserves 
fell  until  they  were  a  danger  signal  pointing 
with  certainty  to  the  need  for  more  conserv- 
ative administration.  Banks  applied  the 
financial  brakes  by  higher  and  higher  inter- 
496 


Banking  Developments 

est  rates.  Stock-market  values,  unduly  in- 
flated by  the  spirit  of  optimism  which  was 
all-pervading,  began  to  melt. 

Just  two  years  ago  this  turn  came.  The 
decline  which  followed  cut  a  billion  dollars 
off  the  value  of  securities  in  a  few  months. 
The  vast  readjustment  which  such  a  change 
in  values  made  necessary  was  accomplished, 
however,  without  panic,  without  great  fail- 
ures, and  with  few  of  those  disasters  which 
usually  are  the  features  of  such  a  period. 
The  way  the  country  met  the  situation  stands 
to-day  as  the  most  striking  monument  we 
have  yet  reared  to  our  increasing  wealth  and 
financial  strength. 

We  have  grown  used  to  cycles  in  business ; 
to  regular  periods  of  expansion  followed  by 
years  of  depression.  These  cycles  have  been 
of  varying  length,  but,  generally  speaking, 
a  decade  would  measure  the  time  from  one 
upturn  to  the  next.  Men  of  experience, 
therefore,  expected  that  the  depression  which 
started  two  years  ago  would  have  to  run 
through  something  like  the  usual  course, 
and  would  last  at  least  for  three  or  four 
years  before  we  had  again  learned  lessons 
of  economy  and  had  settled  down  to  a 
solid  basis  upon  which  to  rear  a  new  struc- 
ture of  prosperity.  I  have  said  that  the 
experience  of  the  most  experienced  had 
been  set  at  naught  by  the  rising  tide  that 
32  497 


Business  and  Education 

had  marked  the  last  great  wave.  Experi- 
ence proved  a  poor  guide  in  measuring  the 
upturn;  will  it  likewise  be  at  fault  in 
measuring  the  period  of  depression?  Is 
the  depression  to  be  of  shorter  duration 
than  in  former  business  cycles?  Have  we 
already  reached,  after  two  years'  down- 
grade, a  level  from  which  we  can  again  start 
up  to  new  heights  of  business  expansion  ?  I 
cannot  answer  these  questions,  but  I  want  to 
present  a  few  statistics  that  I  believe  have 
some  bearing  upon  them. 

What  I  have  now  to  say  has  absolutely  no 
application  to  the  immediate  course  of  the 
stock  market.  Whether  stocks  will  be  higher 
or  lower  to-morrow,  next  week,  or  next 
month,  I  do  not  know,  nor  am  I  particularly 
concerned.  The  fluctuations  which  mark  the 
little  surface  waves  are  not  matters  of  such 
moment.  It  has  seemed  to  me,  however, 
that  it  will  be  interesting,  in  view  of  the 
present  condition  of  business  affairs,  and 
appropriate,  considering  the  place  which  has 
been  chosen  for  this  meeting,  to  make  some 
comparison  of  business  statistics  to-day  with 
conditions  of  ten  years  ago,  and  note  what 
our  position  will  be  ten  years  hence,  if  the 
material  development  of  the  United  States 
is  to  go  on  at  approximately  the  same  rate  of 
progress  which  has  marked  the  development 
of  the  last  ten  years.  I  believe  it  is  fair  to 
498 


Barik'mg  Developments 

assume  that,  generally  speaking,  something 
like  that  rate  of  progress  will  be  maintained. 
Certainly  the  outlook  to-day,  with  currency 
uncertainty  given  way  to  a  securely  fixed 
standard  of  value,  with  a  sound  and  satis- 
factory banking  position,  and  with  no  left- 
over panic  consequences  to  be  reckoned  with, 
as  was  the  case  ten  years  ago  —  certainly 
such  a  situation  offers  reason  for  the  pre- 
sumption that  we  are  in  as  favorable  a  posi- 
tion for  development  in  the  next  ten  years' 
period  as  we  were  at  the  beginning  of  the 
last. 

Ten  years  ago  we  had  a  population  of 
sixty-eight  millions;  to-day  it  is  eighty-two 
millions ;  and  ten  years  hence,  with  this  ratio 
of  increase,  the  population  of  the  United 
States  will  be  ninety-eight  millions.  We 
shall  in  the  next  ten  years  add  to  our  number 
a  population  equal  to  one-half  that  of  France. 
Such  growth  in  numbers,  matched  to  our 
wealth  of  resources,  makes  the  sort  of  mate- 
rial out  of  which  to  shape  an  entirely  new 
level  of  statistics  marking  the  country's  ma- 
terial progress. 

The  total  wealth  of  the  United  States, 
according  to  the  best  estimates  which  we 
have,  has  risen  in  ten  years  from  $75,000,- 
000,000  to  $106,000,000,000.  Ten  years 
more  of  increase  will  make  the  wealth  of 
this  country  $140,000,000,000.  When  we 
499 


Business  and  Education 

remember  that  such  a  total  will  compare  with 
the  total  of  $42,000,000,000  in  1880,  the 
accumulation  is  seen  to  be  at  a  rate  almost 
incredible. 

Our  money  stock  has  increased  in  ten 
years  from  $1,600,000,000  to  more  than 
$2,500,000,000,  and  every  dollar  of  it  is 
sound,  and  every  dollar  of  it  is  on  a  parity 
with  gold.  The  actual  gold  stock  itself  in- 
creased in  that  period  $301,000,000.  If  the 
money  stock  increases  in  the  next  ten  years 
in  the  same  amount,  we  shall  have  $3,400,- 
000,000  of  circulation  at  the  end  of  that 
period.  Incidentally,  it  is  interesting  to  note 
that  national  bank-note  circulation  in  the 
last  ten  years  has  risen  from  $172,000,000 
to  $41 1,000,000,  and  one  might  stop  to  won- 
der, if  this  rate  of  increase  is  to  go  on,  where 
the  Government  bonds  are  to  come  from  in 
the  next  ten  years  to  provide  for  a  further 
increase  of  national-bank  circulation  of 
$250,000,000  or  $300,000,000.  Such  in- 
quiry points  inevitably  to  the  necessity  of 
some  change  in  our  national  banking  laws 
in  the  due  course  of  time. 

National-bank  deposits  in  ten  years  have 
doubled,  going  up  from  $1,600,000,000  to 
$3,300,000,000.  State-bank  deposits  in  that 
time  have  trebled,  increasing  from  about 
$660,000,000  to  $1,900,000,000.  A  care- 
ful estimate  of  the  total  bank  deposits  in 
500 


Banking  Developments 

the  United  States  to-day  —  national,  state, 
savings  banks,  and  trust  companies  —  brings 
them  up  to  a  grand  total  of  $10,000,000,000, 
and  that  compares  with  a  total  ten  years  ago 
of  $4,600,000,000.  The  increase  has  been 
well  over  double.  Will  it  double  again,  and 
shall  we  have  $20,000,000,000  deposits  in 
1914?  If  we  only  make  the  same  actual 
gain,  we  shall  have  over  $15,000,000,000; 
and,  barring  any  unexpected  interference 
with  our  expansion,  I  believe  that  that  is  a 
conservative  figure  and  inside  the  probabil- 
ities. Take  the  case  of  the  institutions  that 
each  of  you  represents.  Do  you  not  antici- 
pate as  much  growth  in  the  next  ten  years  as 
you  have  had  in  the  last?  If  you  do,  and  if 
those  anticipations  are  fulfilled,  and  the  in- 
crease is  general,  the  total  of  banking  re- 
sources at  the  end  of  another  decade  must 
certainly  be  an  astounding  one.  Your  own 
banks  in  Illinois  have  far  outstripped  the 
average  of  the  country.  The  total  deposits 
of  national  and  state  banks  in  Illinois  have 
increased  in  ten  years  from  $213,000,000  to 
$572,000,000.  Why  should  they  not  make 
similar  gain  in  the  next  ten  years  and  Illinois 
deposits  stand  at  $800,000,000? 

In  ten  years  we  have  seen  railroad  gross 

earnings   increase    from   $1,200,000,000   to 

$1,900,000,000.     With  only  an  equal  actual 

increase,  we  shall  have  railroad  earnings  of 

501 


Business  and  Education 

$2,600,000,000  ten  years  from  now;  while, 
if  the  percentage  of  increase  of  the  last  dec- 
ade were  to  be  maintained,  the  figures 
would  reach  $3,000,000,000.  The  lower 
total  is  the  fairer  presumption.  With  gross 
earnings  reaching  such  a  figure,  however, 
with  constantly  improving  methods  of  ad- 
ministration, and  with  more  perfect  roadbeds 
and  equipment,  we  may  expect  to  see  steadily 
increasing  economy  of  operation.  Is  it  not 
fair  to  presume,  then,  that  these  vast  gross 
earnings,  coupled  with  a  decreasing  ratio  of 
expenses,  will  most  certainly  provide  for  an 
increasingly  satisfactory  return  upon  rail- 
road investments? 

I  will  not  weary  you  with  too  many  statis- 
tics. If  you  are  interested  in  pursuing  such 
a  line  of  inquiry,  get  the  Monthly  Summary 
of  the  Bureau  of  Statistics  from  Washington. 
In  its  way  it  is  as  great  an  exposition  of 
statistics  as  is  this  World's  Fair  an  exposi- 
tion of  material  things,  and  it  will  well  repay 
study.  You  will  see  from  the  figures  which 
you  will  find  there,  for  instance,  that  our 
foreign  trade,  which  ten  years  ago  footed 
$1,500,000,000,  was  this  year  $2,450,000,000. 
Our  exports  of  agricultural  products  may  not 
increase  much  from  present  figures,  but  it 
is  safe  to  say  that  our  increasing  command  of 
foreign  markets  for  our  manufactures  will 
perhaps  bring  the  total  of  our  foreign  trade 
502 


UMlVEkolTY 
Banking  Developments    \^  _      ^^     ,  k 

to  $3,000,000,000  in  the  next  decade.  You 
will  see  that  national-bank  loans  and  dis- 
counts, which  were  under  $2,000,000,000 
ten  years  ago,  are  now  $3,725,000,000.  An 
equal  increase  would  carry  us  above,  $4,- 
500,000,000  in  national-bank  loans  ten  years 
hence.  Let  us  hope  those  loans  will  not  in- 
crease with  unconservative  rapidity.  Bank 
clearings  of  the  country  have  increased  two 
and  one-half  times  in  ten  years.  If  progress 
w^ere  to  continue  at  this  rate,  we  should  show 
bank  clearings  of  more  than  $200,000,000,- 
000  at  the  end  of  the  next  ten  years.  You 
will  find  that  the  total  mineral  production 
of  the  United  States  has  increased  in  value 
from  $650,000,000  to  double  that  figure.  If 
there  is  reason  to  suppose  that  this  increase 
will  continue,  we  shall  yet  make  a  record  of 
$2,000,000,000  as  the  annual  product  of  our 
mines.  Our  production  of  steel  has  doubled 
in  ten  years.  The  value  of  the  product 
of  our  cotton  mills  increased  52  per  cent. 
The  volume  of  business,  as  measured  by 
the  receipts  of  the  Post-Ofiice  Department, 
shows  almost  100  per  cent  increase,  those 
receipts  coming  up  from  $75,000,000  in 
1894  to  $144,000,000  for  the  present  fiscal 
year. 

These  illustrations  might  be  indefinitely 
continued,  but  I  have  given  enough  to  point 
out  the  one  conclusion  which  I  wish  to  em- 

503 


Business  and  Education 

phasize,  and  that  is  that  you  men  who  admin- 
ister the  great  banking  resources  of  the 
State  of  IlHnois  need  to  keep  constantly 
before  you  some  of  these  broad  statistics  of 
our  material  progress.  Their  study  cannot 
help  but  be  encouraging  and  useful.  They 
must  lead  to  the  conclusion  that,  in  the  com- 
bination of  population  and  natural  resources, 
we  stand,  as  a  country,  absolutely  unrivalled, 
and  with  nothing  to  balk  our  progress  but 
our  own  mistakes. 

If  we  look  abroad,  we  see  England  strug- 
gling under  most  adverse  conditions,  a  great 
portion  of  her  industrial  population  actually 
underfed,  and  a  million  people  receiving  aid 
under  her  poor-laws.  We  see  in  France  a 
nation  grown  rich  by  thrift,  a  nation  where 
economy  has  become  a  disease,  and  in  the 
growth  of  it  all  initiative  for  new  accom- 
plishments has  been  lost.  In  Italy  we  see  a 
great  industrial  awakening,  but  conditions 
still  so  hard  that  a  large  percentage  of  our 
800,000  of  immigrants  annually  come  from 
that  country.  In  Germany  we  find  a  barren 
land  yielding  from  the  fields  most  meagrely 
and  from  the  mines  hardly  at  all,  but  with  a 
population  whose  energy,  intelligence,  and 
education  have  built  out  of  most  discourag- 
ing conditions  a  vast  industrial  organization 
which  is  our  one  real  competitor  in  the  mar- 
kets of  the  world.  If  we  will  accept  from 
504 


Banking  Developments 

the  Germans  something  of  their  scientific 
methods,  their  carefulness,  their  thorough- 
ness, and  their  wilHngness  for  hard  work, 
and  bring  such  quahties  to  bear  upon  our 
own  resources,  the  figures  which  I  have  been 
quoting  as  possibihties  of  the  future  will  yet 
look  small. 

These  statements  are  generalities  intended 
to  apply  only  over  considerable  periods. 
That  the  next  ten  years  are  to  see  to  some 
extent  a  repetition  of  the  development  of  the 
last  ten  is,  I  think,  a  fair  presumption. 
Whether  that  upward  movement  has  already 
started,  or  whether  it  is  to  start  next  month 
or  next  year,  I  do  not  profess  to  know,  and 
nothing  that  I  have  said  should  be  taken  as 
indicating  the  fixing  of  a  definite  date  in 
regard  to  returning  prosperity.  Business  to- 
day is  unsatisfactory  in  many  respects.  The 
memories  and  sore  spots  which  the  declines 
of  the  last  two  years  ^have  left  will  make 
many  people  slow  in  accepting  the  conclu- 
sion that  we  are  ready  for  another  great 
commercial  advance.  We  are  always  in 
danger  of  overdoing,  and  we  may  for  the 
moment,  perhaps,  have  already  made  that 
error,  for  prices  have  shown  most  substan- 
tial recovery  —  a  recovery  certainly  in  ad- 
vance of  what  would  be  warranted  by  the 
present  actual  conditions.  It  is  safe  to  say, 
however,  that  we  are  to-day  in  a  sound  finan- 
505 


Business  and  Education 

cial  position.  Bank  reserves  are  ample;  at 
least  national-bank  reserves  are.  Bank  loans 
and  discounts  are  not  of  a  character  to  offer 
grounds  for  any  general  criticism.  We  have 
probably  fully  paid  off  the  foreign  indebted- 
ness in  the  shape  of  finance  bills  which  two 
or  three  years  ago  had  reached  large  totals. 
We  are  in  a  position  to  command  interna- 
tional credits,  and  to  bring  gold  to  strengthen 
our  reserves,  if  we  should  need  it.  We  have  a 
corn  crop  that  is  worth  $1,000,000,000,  a  cot- 
ton crop  worth  $600,000,000,  and  a  wheat 
crop  worth  $412,000,000.  The  value  of  these 
three  crops  alone  this  year  is  $2,012,000,000, 
which  compares  with  the  value  of  these  same 
crops  ten  years  ago  of  $1,067,000,000. 

We  have  learned  some  valuable  lessons  in 
finance,  and  the  memory  of  the  last  two 
years,  reminding  us  of  the  results  of  the 
mistakes  made  at  the  height  of  the  boom 
period,  is  still  clearly  enough  in  our  minds 
to  warrant  the  belief  that  we  shall  administer 
our  financial  affairs  with  a  fair  degree  of 
common-sense  for  some  time  to  come.  We 
have  learned  that  there  is  not  a  new  political 
economy,  but  that,  in  spite  of  our  vast  re- 
sources, our  growing  wealth,  and  our  recu- 
perative power,  we  must  obey  the  same  old 
sound  laws  of  finance  and  commerce  that 
have  long  ruled. 

I  am  convinced  that  the  possibilities  of 
506 


Banking  Developments 

another  great  business  expansion  are  at 
hand,  but  connected  with  those  great  pos- 
sibihties  are  great  responsibihties.  Those 
responsibihties  are  largely  on  our  shoulders. 
The  bankers  of  this  country  will,  in  the  wis- 
dom of  the  administration  of  their  trust,  or 
in  their  lack  of  wisdom,  have  great  influence 
on  the  beginning,  the  extent,  and  the  length 
of  this  next  period  of  prosperity. 

I  cannot  too  strongly  emphasize  my  be- 
lief in  the  importance  of  having  our  banks 
and  financial  interests  prepared  to  play  their 
proper  part  in  the  return  of  prosperity  and 
the  further  development  of  business.  We 
need  banking  laws  that  are  wise  and  bank- 
ing administration  that  is  wise.  Encourage- 
ment to  a  wild  speculative  boom,  at  this  time, 
when  improvement  is  justified  more  by  hopes 
and  possibilities  than  by  immediate  actual 
conditions,  might  set  the  whole  period  of  re- 
covery back  a  month,  six  months,  a  year.  A 
great  speculative  boom  now  is  not  what  is 
needed.  It  is  indeed  one  of  the  special  dan- 
gers. If  bankers  in  the  great  centres  are  not 
conservative  in  the  inducements  they  hold 
out  to  secure  deposits,  if  they  accumulate 
great  stocks  of  money  which  will  loan  at 
such  low  rates  as  to  encourage  unduly  a 
speculative  spirit,  they  will  strike  a  blow  at 
this  returning  prosperity  which  may  long 
delay  its  coming. 

507 


Business  and  Education 

There  is  another  danger  in  the  banking 
situation.  During  the  height  of  the  last 
commercial  expansion  people  so  lost  their 
heads  that  they  excused  extravagant  and 
foolish  actions  by  saying  that  there  is  a 
new  political  economy,  that  the  old  laws  no 
longer  apply  under  the  new  conditions. 
They  were  wrong,  lamentably  wrong.  And 
to-day  a  thing  for  bankers  of  this  country  to 
remember  is  that  there  have  been  discovered 
no  new  laws  of  finance  which  make  banking 
without  reserves  safe  and  conservative.  A 
bank  holding  money  repayable  on  demand 
must  keep  a  fair  proportion  of  that  money  in 
its  vaults.  The  experience  of  all  financial 
history  points  to  that  necessity.  Whenever 
that  law  has  been  violated,  disaster  has  ul- 
timately followed.  Do  not  permit  your- 
selves to  believe  that  there  has  been  any  new 
discovery  in  finance  which  will  safely  permit 
banking  without  reserves. 

I  believe  that  the  conditions  are  again 
favorable  to  a  return  of  prosperity.  I  be- 
lieve it  is  time  for  optimism.  So  long  as 
we  remember  in  humbleness  our  mistakes 
and  hold  close  to  a  proper  conservatism,  the 
course  of  financial  events  seems  likely  to  fol- 
low only  one  general  direction,  and  that  is 
toward  improvement,  toward  expanding 
business,  and  toward  better  times. 


508 


THE   LESSONS    OF    OUR   WAR 
LOAN 

The  Forum,  1898;  written  when  the  author  was  As- 
sistant Secretary  of  the  Treasury. 

The  United  States  has  floated  a  $200,000,- 
000  loan  at  the  lowest  rate  of  interest  at 
which  a  nation  ever  disposed  of  its  obliga- 
tions in  time  of  war.  It  has  received  sub- 
scriptions of  $7  for  every  $1  of  bonds  offered 
the  public,  or,  roundly,  $1,400,000,000  for 
the  $200,000,000  loan.  Under  the  provi- 
sions of  the  law  as  passed  by  Congress,  every 
subscription  made  by  a  syndicate,  corpora- 
tion, or  association  was  rejected;  Congress 
having  taken  the  broad  ground  that  individ- 
uals should  have  preference.  Every  sub- 
scriber asking  for  more  than  $4,500  received 
no  portion  of  his  subscription,  as  the  entire 
loan  was  absorbed  by  individual  offers  for 
smaller  amounts ;  the  allotment  being  made 
under  the  provisions  of  the  law  so  that  the 
humble  investors  had  preference  over  the 
richer  ones.  Half  of  the  loan,  more  than 
$100,000,000,  has  gone  to  230,000  people, 
each  of  whom  subscribed  for  $500  or  less. 
The  number  of  persons  who  applied  for  the 
bonds  reached  320,000;    and  if  they  were 

509 


Business  and  Education 

mustered  into  military  ranks  they  would  out- 
number by  almost  100,000  our  army  of  regu- 
lars and  volunteers  enlisted  for  the  Spanish- 
American  War.  Standing  at  dress,  side  by 
side,  they  would  form  a  line  one  hundred 
and  twenty  miles  long,  —  a  line  that  would 
reach  clear  across  Cuba  at  its  broadest  point 
and  half-way  back,  or  from  Washington  to 
Philadelphia.  Had  all  these  investors  pre- 
sented their  subscriptions  with  the  currency 
attached,  it  would  have  required  three  times 
the  cash  held  in  the  vaults  of  the  thirty-six 
hundred  national  banks  of  the  country. 
Some  idea  of  the  enormous  total  of  $1,400,- 
000,000  subscribed  by  these  320,000  persons 
may  be  gained  by  a  comparison  with  the 
amount  of  money  in  circulation  in  the 
United  States  on  August  i,  1898.  On  that 
date  the  money  of  all  kinds  in  circulation 
aggregated  $1,809,198,000.  If  the  United 
States  had  accepted  in  currency  all  the  sub- 
scriptions made,  the  Treasury  would  have 
absorbed  seven-ninths  of  all  the  money  in 
circulation. 

More  than  $100,000,000  in  cash  was 
turned  into  the  Treasury  as  the  subscriptions 
were  made,  and  before  the  delivery  of  bonds 
was  begrin.  The  remaining  $100,000,000  is 
being  gathered  in  as  fast  as  the  augmented 
machinery  of  the  Treasury  can  collect  it. 
The  handling  of  this  vast  sum  has  been  so 
510 


Lessons  of  Our  War  Loan 

careful  that  rates  of  interest  in  the  New 
York  money  market,  after  the  books  were 
closed  and  the  bonds  began  to  be  issued,  were 
as  low  as  ij/^  per  cent,  i.e.^  materially  lower 
than  before  the  loan  was  offered.  The  whole 
transaction  was  accomplished  with  scarcely 
a  perceptible  movement  at  the  money  cen- 
tres, and  absolutely  without  creating  the 
smallest  degree  of  stringency  or  congestion. 

Such  illustrations  as  these  give  some  in- 
dication of  the  success  of  this  first  experiment 
of  ours  with  a  really  popular  loan.  It  has 
been  a  phenomenal  success;  and  it  presents 
a  good  many  new  features  in  financial  affairs. 
It  furnishes  the  only  real  test  we  have  ever 
had  of  a  popular  subscription.  It  exhibits 
the  credit  of  the  United  States  in  the  most 
favorable  light  in  which  it  has  ever  been 
seen.  It  shows  the  investing  strength  of  the 
people  to  be  greater  than  the  most  optimistic 
would  have  supposed,  and  our  gain  in  finan- 
cial prestige  must  be  regarded  as  one  of  the 
foremost  results  of  the  war. 

From  the  time  when  Congress,  with 
hardly  a  word  of  debate,  appropriated  $50,- 
000,000  for  the  national  defence,  to  the  act- 
ual beginning  of  hostilities,  scarcely  a  day 
passed  without  some  event  which  made  it 
apparent  that  the  Government  revenues  must 
be  augmented  by  loan.  The  Bill  to  provide 
ways  and  means  to  meet  war  expenditures 
511 


Business  and  Education 

was  a  measure  which  showed  far  more 
courage  than  legislators  are  apt  to  evince 
when  such  a  crisis  comes.  It  was  a  measure 
that  laid  the  tax-collector's  hand  on  every 
business  —  in  fact  upon  every  citizen  —  and 
was  designed  to  draw  into  the  Treasury  an 
enormous  additional  revenue.  The  operation 
of  a  revenue  law  is  too  slow,  however,  for 
such  exigencies  as  war;  and,  with  expenses 
reaching  an  average  of  $1,250,000  a  day,  the 
necessity  for  an  issue  of  bonds  was  plain. 
When  it  became  known  that  Congress  con- 
templated fixing  the  rate  of  interest  at  3  per 
cent  there  was  a  quiet  protest  from  some  of 
the  great  financiers.  Three  per  cent,  they 
declared,  was  too  low.  They  pointed  to  the 
rate  at  which  former  bond  issues  had  been 
made  in  time  of  peace.  They  called  atten- 
tion to  the  fact  that  the  4  per  cent  bonds  of 
1925  were  selling  as  low  as  wjYa,  a  basis 
which  would  net  the  investor  nearly  3^  per 
cent.  They  asked  why  heavy  subscriptions 
to  a  short-term  bond  at  3  per  cent  should  be 
expected,  when  one  could  go  into  the  market 
and  buy  a  bond  of  exactly  as  good  character, 
and  with  a  far  longer  term  to  run,  on  a  basis 
that  would  net  3>i  per  cent.  Not  a  few  of 
the  financial  leaders  were  sore  in  spirit  over 
the  criticism  that  had  followed  them  after 
the  last  Government  bond  sale.  They  felt 
that  they  had  come  forward  then  at  a  time 
512 


Lessons  of  Our  War  Loan 

when  the  Treasury  was  in  great  peril,  and 
had  furnished  money  that  was  badly  needed, 
and,  in  addition  to  furnishing  money,  had 
undertaken  a  most  expensive  contract  to  pre- 
vent gold  exports.  Their  profits  had  been 
but  a  fraction  of  what  the  public  imagined 
them  to  be;  and  the  execrations  that  had 
been  heaped  upon  them  had  left  little  desire 
at  this  time  to  turn  in  and,  from  purely 
patriotic  motives,  aid  the  Treasury  in  its 
financing. 

The  Secretary  of  the  Treasury  saw  some 
of  the  leading  financiers  who  held  these 
views.  He  met  their  objections  so  com- 
pletely that  his  suggestion,  that  the  great 
financial  interests  should  show  to  the  country 
a  broad-spirited  patriotism  such  as  would 
quiet  the  host  of  critics,  was  received  with 
surprising  good-will.  His  suggestion  was 
one  that  might  at  first  view  seem  almost 
quixotic,  considering  the  rate  at  which  Gov- 
ernment bonds  were  then  selling.  It  was 
that  some  of  the  important  financial  interests 
should  come  together  and  guarantee,  without 
profit  to  themselves,  the  absolute  success  of 
the  loan,  —  that  they  should  agree  to  take  all 
or  any  part  that  should  be  unsubscribed  by 
the  people.  This  underwriting  of  $200,000,- 
000  of  securities  at  a  price  substantially 
higher  than  that  at  which  similar  securities 
were  selling  in  the  market  was  to  be  done 
33  513 


Business  and  Education 

solely  for  the  good  that  would  follow  such 
an  exhibition  of  disinterested  and  patriotic 
financiering. 

The  result  of  Secretary  Gage's  suggestions 
was,  that  on  the  morning  of  the  day  the  sub- 
scription opened  two  syndicate  bids  were  re- 
ceived: one  from  the  National  City  Bank, 
Vermilye  &  Co.,  and  the  Central  Trust  Com- 
pany, and  the  other  from  a  syndicate  headed 
by  Mr.  J.  Pierpont  Morgan.  Each  of  these 
syndicates  agreed  to  take  all  or  any  part  of 
the  issue  not  taken  by  the  public.  That 
guarantee  put  spirit  into  the  loan  from  the 
first  moment.  People  said :  "If  the  New 
York  bankers  stand  ready  to  take  the  whole 
loan  twice  over,  it  must  be  a  good  thing  to 
have." 

There  were  two  reasons  why  the  subscrip- 
tion should  be  an  assured  success,  in  spite 
of  the  fact  that  shortly  before  it  opened  Gov- 
ernment bonds  were  selling  on  a  3^^  per  cent 
basis.  One  was  that,  although  there  were 
marked  quotations  for  the  4  per  cent  bonds 
on  that  basis,  it  could  not  be  called  a  settled 
or  fairly  established  market  price.  A  few 
bonds  could  no  doubt  have  been  bought  at 
that  price.  Any  attempt  to  purchase  a  large 
block  would  have  sharply  advanced  the  quo- 
tation, although  it  is  probably  equally  true 
that  a  large  block  thrown  upon  the  market 
would  have  depressed  the  price.  The  reason 
514 


Lessons  of  Our  War  Loan 

why  it  was  certain  that  a  market  could  be 
found  for  the  whole  issue  on  a  3  per  cent 
basis  was  in  the  use  which  could  be  made  of 
the  bonds  by  national  banks  as  a  basis  for 
new  circulation,  or  to  replace  the  old  4's  and 
5's  which  banks  had  on  deposit  to  secure 
their  circulating  notes. 

The  superiority  from  the  standpoint  of 
profit  of  the  new  3-per-cents  over  the  4-per- 
cents  of  1925  as  a  basis  for  national-bank 
circulation  is  shown  by  the  following  table: 

TYPICAL  ILLUSTRATION   OF  |ioo,ooo 
INVESTMENT 


3's  of  1908-18  at  par 


4's  of  1925  at  12 7 J 

@  128 


Capital  invested     .     .     . 
Par  value  of  bonds  pur- 
chased     

Circulation     .     .     .     . 
Receipts  : 

Interest  on  circulation 
(6  per  cent)      .     .     . 
Interest   on  bonds  de- 
posited   .     .  .     . 

Gross  receipts  .     . 
Deductions  : 

Tax 

Expenses 

Sinking  fund  .... 

Total  deductions  . 


$100,000.00 

100,000.00 
90,000.00 


Net  receipts 

Interest    on    capital    in- 
vested (6  per  cent)  .     . 

Profit  on  circulation  : 

Amount 

Per  cent 


5,400.00 
3,000.00 


900.00 
62.50 


$8,400.00 


962.50 


$7>437-So 
6,000.00 


$100,000.00 

78,354-55 
70,519.09 


4,231.15 

3,134-18 

«7>36S.33 

900.00 
62.50 

337-67 

1,300.17 

$6,065.16 

6,000.00 

Advantage  of  3's  at  par  over  4's  at 
per  cent. 


$1,437-5° 

27i  @  128 


$65.16 
0.065 

August  I,  1898,  1.372 


515 


Business  and  Education 

The  Government  Actuary,  before  the 
books  of  the  loan  were  opened,  had  figured 
for  the  Secretary  that  the  new  3  per  cent 
bonds  at  par  would  be  equivalent,  as  a  basis 
for  national-bank  circulation,  to  the  4-per- 
cents  of  1925,  if  the  latter  had  been  quoted 
at  so  low  a  figure  as  1 1 1 .  At  that  time  the 
actual  quotations  of  the  4-per-cents  of  1925 
ranged  from  120  to  123. 

The  3-per-cents  of  1908-18  purchased  at 
par,  August  i,  1898,  as  security  for  circula- 
tion of  bank  notes,  will  yield  a  profit  of  1.437 
per  cent.  The  4's  of  1925,  in  order  to  yield 
the  same  profit,  would  need  to  be  purchased 
at  11O5V  ;  whereas  they  were  quoted  August 
I,  1898,  at  the  high  rate  of  I27>4  @  128. 

Congress  introduced  a  novel  element  into 
Government  financiering  when  it  provided 
that  ''  in  allotting  said  bonds  the  several  sub- 
scriptions of  individuals  shall  be  first  ac- 
cepted, and  the  subscriptions  for  the  lowest 
amounts  shall  be  first  allotted." 

This  latter  provision  brought  a  new  ele- 
ment of  chance  into  the  loan,  such  as  had 
never  been  in  a  bond  issue  before.  No  one 
could  tell  just  where  the  line  would  be 
drawn  below  which  all  individual  subscrip- 
tions would  be  filled  in  full,  and  above  which 
no  subscriptions  would  receive  allotments. 
It  was  evident  that  the  Treasury  could  not 
ask  full  payment  to  accompany  the  subscrip- 
516 


Lessons  of  Our  War  Loan 

tions,  because  of  the  impossibility  of  saying 
whether  an  allotment  would  be  made  to  a 
subscriber.  It  was  plain,  too,  that  the  plan 
under  which  the  previous  bond  issue  had 
been  regulated,  permitting  bids  to  be  made 
without  any  deposit  of  earnest  money,  would 
never  do.  A  medium  was  struck.  It  was 
decided  that  by  no  chance  could  the  bona 
fide  subscriptions  of  $500  and  less  absorb 
the  total  amount.  Therefore  announcement 
was  made  that  all  subscribers  for  $500  or 
less  should  make  full  payment;  and  the 
Department  promised  that  an  allotment  of 
bonds  would  be  absolutely  made  on  every 
such  subscription.  Those  who  subscribed 
for  more  than  $500  were  required  to  deposit 
2  per  cent  thereof  to  insure  the  good  faith 
of  the  application.  Allotments  in  this  class 
were  to  be  made  inversely  to  the  size  of 
the  subscription.  The  most  sanguine  friends 
of  the  popular  loan  idea  hardly  anticipated 
that  the  subscriptions  for  $500  and  less 
would  reach  an  aggregate  of  over  $30,000,- 
000  or  $40,000,000;  and  many  good  judges 
placed  the  limit  well  below  those  figures. 
As  a  matter  of  fact,  the  subscriptions  for 
$500  and  less  reached  an  aggregate  of  a  little 
over  $101,000,000. 

It  was  evident  soon  after  the  books  of  the 
loan  were  opened  that  persons  who  wished 
blocks  of  the  bonds  were  getting  individuals 

517 


Business  and  Education 

to  subscribe  in  their  interest.  The  Treasury 
Department  immediately  interposed  such 
obstacles  as  it  could  command  in  the  way 
of  such  plans.  In  every  case  where  blocks 
of  subscriptions  came  in  accompanied  by 
powers  of  attorney  authorizing  banks  or  any 
person  or  interest  other  than  the  subscriber 
to  receive  the  bonds,  the  subscription  was 
held  in  suspense  until  the  bank  or  person 
sending  in  such  blocks  of  subscriptions  made 
answer  unequivocally  as  to  whether  or  not 
the  subscriptions  were  bona  fide  and  solely 
in  the  interest  of  the  persons  signing  the 
subscription  blanks,  and  whether  the  bank 
or  any  person  other  than  the  subscriber  had 
an  ulterior  interest  in  the  subscription.  More 
than  $40,000,000  of  subscriptions  were  thus 
suspended,  and  the  persons  sending  them 
were  catechised  as  to  their  bona  fide  char- 
acter. It  was,  of  course,  quite  impossible 
for  the  Treasury  to  organize  itself  into  a 
trial  court  and  take  evidence.  The  Depart- 
ment was  forced  to  accept  the  statements 
made  by  the  subscribers,  although  it  used 
with  good  effect  the  machinery  of  the  Secret 
Service  in  verifying  such  statements.  Sub- 
scriptions representing  millions  were  re- 
turned to  the  senders,  who  frankly  admitted 
that  they  had  misunderstood  the  conditions 
and  wished  no  improper  advantage.  It  is  not 
claimed  that  the  subscription  list  was  kept 

518 


Lessons  of  Our  War  Loan 

entirely  clean  from  subscriptions  received  in 
the  interest  of  persons  other  than  the  sub- 
scribers. Undoubtedly  false  statements  were 
in  some  cases  made,  and  blocks  of  bonds 
secured  in  a  way  not  within  the  spirit  of  the 
law ;  but  it  is  a  fact  that  the  most  strenuous 
efforts  were  used  at  every  stage  to  prevent 
persons  having  no  real  interest  in  the  sub- 
scription from  subscribing  and  immediately 
assigning  their  interests  to  some  banking 
institution. 

As  the  subscription  advanced,  quotations 
began  to  be  made  for  the  future  delivery  of 
the  bonds.  Trades  were  made  at  102,  — 
103,  —  and  finally  as  high  as  105}^.  To 
get  the  new  bonds  looked  like  getting  gold 
dollars  at  a  discount.  With  standing  offers 
of  3  or  4  per  cent  premium,  it  was  small 
wonder  that  the  last  days  of  the  subscription 
saw  some  phenomenal  receipts.  On  each  of 
the  last  two  days  the  Department  received 
25,000  applications.  It  was  not  growing 
patriotism  on  the  part  of  the  humble  invest- 
ors that  so  increased  the  mail.  It  was  market 
quotations  showing  a  substantial  premium 
for  bonds  that  the  Government  was  offering 
at  par. 

From  the  point  of  view  of  a  popular  sub- 
scription the  loan  was  in  every  way  an 
astounding  success;  but  it  must  not  be  for- 
gotten that  there  were  elements  of  specu- 
5^9 


Business  and  Education 

lation  as  well  as  of  patriotism,  that  there  was 
a  market  showing  immediate  profit  for  every 
person  who  could  secure  a  bond. 

The  task  of  handling  the  loan  has  been 
one  that  few  people  have  comprehended. 
The  action  of  Congress  in  providing  an  issue 
of  bonds  of  so  low  a  denomination  as  $20, 
in  giving  preference  to  individual  bidders, 
and  in  providing  that  allotments  should  be 
made  in  an  inverse  order  to  the  size  of  the 
subscriptions  upon  all  individual  offers,  made 
an  amount  of  detail  such  as  had  been  un- 
known in  the  Department's  previous  expe- 
rience. The  provision  for  payment  in  five 
instalments,  and  the  necessity  for  interest 
calculations  on  each  one  of  these  partial 
payments,  added  vastly  to  that  detail.  In- 
deed, the  task  at  last  was  one  that  was  clearly 
the  greatest  clerical  undertaking  in  which  the 
Government  ever  engaged  in  the  same  length 
of  time. 

Congress  is  always  jealous  of  depart- 
mental preparations  in  advance  of  legisla- 
tion; and  no  actual  step  could  be  taken  by 
the  Treasury  Department  to  prepare  for  this 
issue  of  bonds  until  the  war  measure  had 
passed  both  the  House  and  the  Senate.  The 
final  action  was  taken  when  the  House  con- 
curred in  the  Senate's  amendment  at  noon, 
Saturday,  June  11.  At  3  130  that  afternoon 
the  copy  for  the  preliminary  circulars  and 
520 


Lessons  of  Our  War  Loan 

instruction  blanks  was  in  the  hands  of  the 
public  printer.  At  nine  o'clock  Monday 
morning  the  public  printer  delivered  to  the 
Treasury  Department  the  first  instalment  of 
4,000,000  sheets  of  printed  matter;  and  the 
rest  followed  as  rapidly  as  they  could  be 
unloaded  from  the  wagons. 

A  great  force  had  been  engaged  in  ad- 
dressing envelopes  to  contain  the  subscrip- 
tion papers  and  circulars  of  information. 
In  a  little  over  twenty-four  hours  after  the 
receipt  of  the  first  printed  copies  the  mails 
were  carrying  these  circulars  to  every  bank, 
national,  State,  and  private,  to  every  post- 
master, and  to  every  express-office  in  the 
country,  while  to  24,000  newspapers  details 
were  sent,  so  that  they  might  give  informa- 
tion to  the  people  concerning  the  character 
of  the  Government  bond,  and  how  subscrip- 
tions would  be  received. 

There  was  in  the  arrangements  every 
element  of  popular  success.  The  bonds  were 
issued  in  a  popular  cause.  They  were  issued 
at  a  time  when  money  was  easy  and  securities 
were  high.  They  were  issued  at  par ;  so  that 
there  was  no  calculation  to  discourage  the 
most  inexperienced  investor.  Any  man  with 
$20  knew  that  he  could  invest  it,  and  get  a 
$20  security  back.  There  was  no  commis- 
sion, no  premium,  no  restriction  as  to  the 
character    of    the    remittance.      Subscribers 

521 


Business  and  Education 

were  permitted  to  send  their  money  in  any 
form  in  which  credits  could  be  forwarded; 
and  the  Treasury  received  any  form  of  cur- 
rency of  the  United  States,  any  kind  of  bank- 
check  or  draft,  as  well  as  post-office  money- 
orders,  and  express  money-orders.  Could 
there  have  been  more  perfect  conditions  for 
a  successful  popular  loan? 

The  more  enthusiastic  advocates  of  a  pop- 
ular loan  were  particularly  pleased  with 
those  regulations  of  the  Department  which 
provided  for  receiving  subscriptions  at  post- 
offices  and  remittances  by  post-office  money- 
orders.  It  is  interesting  to  note  that  out  of 
the  total  subscription  only  $728,000  was 
received  through  this  channel.  Posters  were 
hung  up  and  subscription-blanks  distributed 
to  over  20,000  express-offices;  for  it  was 
believed  by  some  that  many  people  who  had 
not  banking  connections  would  avail  them- 
selves of  this  easy  means  of  transmitting 
money.  The  total  receipts  in  the  shape  of 
express  money-orders  were  but  $60,000. 
There  was  received  through  the  mails  in 
currency  over  $731,000.  It  was  not  a  rare 
thing  to  receive  a  $1,000  bill  in  an  unregis- 
tered letter.  It  is  a  tribute  to  the  excellence 
of  the  mail-service  that  there  was  no  com- 
plaint from  this  vast  army  of  subscribers  of 
the  loss  of  a  currency  remittance. 

As  a  matter  of  fact  the  subscription  illus- 
522 


Lessons  of  Our  War  Loan 

trates  wonderfully  well  how  thoroughly 
educated  are  the  people  of  the -United  States 
in  the  use  of  banking  instruments.  Over 
$100,000,000  in  checks,  drafts,  and  certifi- 
cates of  deposit  were  received  from  sub- 
scribers for  the  $500  and  smaller  bonds, 
while  the  2-per-cent  deposits  on  the  subscrip- 
tions for  the  larger  amounts  were  wholly  in 
the  shape  of  certified  checks.  About  $198,- 
500,000  of  the  $200,000,000  bonds  issued 
will  be  paid  for  by  means  of  bank-paper  and 
certificates  of  deposit. 

Some  idea  of  the  detailed  work  in  con- 
nection with  the  issue  can  be  had  from  some 
figures  of  the  loan.  Subscriptions  were 
received  from  320,000  persons.  Among 
these  there  were  230,000  of  individual  sub- 
scriptions for  $500  or  less.  The  subscription 
was  made  up  roundly  as  follows: 

Individual  subscriptions  for  $500 
and  less $101,000,000 

Individual  subscriptions  for  amounts 
larger  than  $500 358,350,000 

Subscriptions  of  corporations,  as- 
sociations, etc 434,650,000 

Syndicate  subscriptions    ....       500,000,000 

Total, $1,394,000,000 

The  loan  closed  at  three  o'clock  of  the 
afternoon  of  July  14.  In  less  than  three 
hours  every  corporation  subscription  was  in 
the  mail  with  a  letter  of  rejection,  and  every 
individual  subscription  for  amounts  of  $50,- 

523 


Business  and  Education 

ooo  and  over  was  also  on  its  return  trip  with 
a  similar  letter.  Seven  hours  after  the  sub- 
scription closed  the  Department  was  able  to 
announce  quite  accurately  where  the  line 
would  be  drawn  below  which  all  subscrip- 
tions would  be  allotted.  When  it  is  remem- 
bered that  the  name  of  every  subscriber  had 
to  be  inscribed  at  least  twelve  times  in  the 
complex  process  of  official  book-keeping, 
the  collection  of  remittances,  the  mailing  of 
notifications  of  receipt  and  allotment,  the 
addressing  of  envelopes,  the  making  of  card- 
indexes,  and  in  the  writing  of  small  checks 
covering  the  interest  from  the  receipt  of  the 
subscription  to  August  i  (the  date  when  the 
bonds  began  carrying  their  own  interest), 
some  idea  of  the  clerical  labor  involved  may 
be  had. 

Allotments  were  made  to  practically  300,- 
cxx)  successful  subscribers.  Multiply  that 
by  12,  and  recollect  that  every  entry  of  a 
name  had  to  have  an  independent  verifica- 
tion, and  it  will  be  seen  that  this  writing  of 
3,600,000  names  and  addresses  was  a  task  of 
no  small  proportions.  But  that  takes  no 
account  of  the  work  in  connection  with  the 
$1,200,000,000  subscriptions  returned,  nor 
of  the  vast  correspondence  resulting  from 
errors  in  every  conceivable  form  made  by 
subscribers  in  filling  out  their  blanks  and 
sending  their  remittances.     From  the  time 

524    . 


Lessons  of  Our  War  Loan 

the  envelopes  were  dumped  from  the  mail- 
bags,  —  a  force  of  twenty  people  was  re- 
quired to  open  them,  —  through  all  the  com- 
plicated operations  of  listing,  scheduling, 
collecting  remittances,  opening  accounts, 
calculating  interest,  and,  finally,  putting  up 
bond  and  interest-checks  and  sealing  each 
envelope  with  five  wax  seals  bearing  the  im- 
print of  the  seal  of  the  Treasury,  the  work 
has  been  performed  by  a  temporary  force 
organized  and  drilled  for  this  special  pur- 
pose. The  force  was  employed  without 
regard  to  Civil-Service  rules.  Legibility  of 
handwriting  and  good  moral  character  were 
the  tests  imposed.  A  corps  of  five  hundred 
clerks  has  been  engaged  on  the  work.  For 
the  expenses  of  the  issue,  the  getting  out  of 
circulars,  stationery,  employing  clerical  help, 
engraving  and  printing  bonds,  and,  finally, 
paying  the  express  companies  for  transport- 
ing them,  Congress  has  allowed  -^  of  i  per 
cent,  —  the  smallest  commission  for  expenses 
ever  paid  by  the  Government  for  the  floating 
of  any  loan. 

The  sealing  of  the  packages  is  alone  a 
great  task.  Five  seals  are  put  on  each 
package;  and  there  will  be  about  300,000 
packages ;  representing  a  total  of  about 
1,500,000  wax  seals.  The  bonds  are  de- 
livered by  express  companies;  the  Govern- 
ment  paying   charges,    and   the   companies 

525 


Business  and  Education 

being  pecuniarily  responsible  for  correct 
delivery. 

The  permanent  work  of  the  Treasury 
Department  will  be  materially  increased  by 
this  issue.  The  addition  of  such  a  great 
number  to  the  total  of  outstanding  bonds  will 
add  enormously  to  the  work  of  making  inter- 
est payments ;  the  increase  in  number  being 
far  out  of  proportion  to  the  increase  in  the 
outstanding  funded  debt,  because  of  the 
small  denominations  and  the  widely  scat- 
tered holdings.  It  is  just  as  much  clerical 
work  to  take  care  of  a  fifteen-cent  coupon 
which  matures  every  three  months  on  a  $20 
bond  as  it  is  to  pay  the  interest  on  a  $10,000 
bond. 

The  cost  of  handling  a  $20  bond  makes 
it  a  rather  expensive  security  to  the  Govern- 
ment. But,  when  looked  upon  in  the  broader 
sense,  these  $20  bonds  are  the  best  form  of 
security  the  Government  has  ever  issued. 
The  great  multiplication  of  bondholders, 
which  has  resulted  from  the  manner  in  which 
this  loan  has  been  popularized,  cannot  but  be 
an  important  factor  in  the  national  life.  If 
it  were  a  fact,  that  each  of  the  300,000  sub- 
scribers was  a  bona  iide  investor  v/ho  would 
hold  the  Government's  security  as  a  perma- 
nent investment,  the  influence  of  such  a  dis- 
tribution of  Government  obligations  would 
certainly  be  marked  and  beneficial.  It  is 
526 


Lessons  of  Our  War  Loan 

altogether  too  much  to  say  that  all  the  sub- 
scribers to  this  loan  have  purchased  the  bonds 
with  the  idea  of  holding  them  permanently 
in  their  strong-boxes.  In  any  consideration 
of  this  phase  of  the  loan,  the  fact  must  not 
be  lost  sight  of  that  the  bonds  were  quoted 
at  a  marked  premium  during  the  whole  time 
the  loan  was  in  progress,  and  that  the  Gov- 
ernment was  selling  a  security  at  par  which 
the  purchaser  knew  he  could  resell  at  an 
immediate  profit.  Speculation  and  not  per- 
manent investment,  therefore,  was  to  a  great 
extent  the  moving  factor.  Undoubtedly  the 
issue  will  be  largely  consolidated,  and  many 
of  the  bonds  will  find  their  way  into  the 
hands  of  the  people  who  will  pay  the  most 
for  them. 

As  a  general  proposition.  Government 
bonds  are  worth  most  to  national  banks,  as 
they  can  use  them  as  a  basis  for  circulation 
or  as  security  for  Government  deposits ;  and 
that  being  the  case,  it  naturally  follows  that 
a  large  number  of  these  bonds  will  find  their 
way  into  the  assets  of  the  national  banks. 
This  is  no  argument  against  the  popular  suc- 
cess of  the  loan,  but  is  merely  a  factor  to  be 
considered  in  measuring  that  success. 

After  every  allowance  is  made,  after  all 
the  modifying  conditions  are  considered, 
there  still  remains  the  fact  that  this  loan  has 
been   a   remarkable    exhibition   of   financial 

527 


Business  and  Education 

strength,  of  faith  in  the  Government's  secur- 
ities, and  of  the  disposition  of  the  Govern- 
ment to  favor  in  its  financial  operations  people 
of  small  means.  In  this  latter  respect  the 
response  has  been  everything  that  could  have 
been  expected.  Small  investors  have  shown 
their  readiness  to  deal  directly  with  the  Gov- 
ernment, and  in  great  numbers  have  become 
purchasers  of  small  amounts  of  bonds.  The 
nation  is  stronger  because  of  this  distribu- 
tion of  its  securities.  The  people  are  well 
satisfied,  because  of  the  opportunities  that 
have  been  offered  them.  Critics  of  capital 
have  been  robbed  of  some  of  their  much-used 
illustrations  by  the  remarkably  patriotic 
action  of  the  great  financial  interests  in 
guaranteeing  the  success  of  the  loan;  and 
the  whole  financial  world  has  been  enlight- 
ened as  to  the  solidity  of  our  institutions  by 
the  object-lesson  of  a  3  per  cent  war  loan 
selling  in  the  market  at  105  while  hostilities 
were  still  in  progress. 


528 


THE    TREASURY  1 

Scribner's  Magazine,  1902. 

Astonishment  at  the  extent  and  diversity 
of  interests  embraced  in  the  Treasury  De- 
partment must  have  been  one  of  the  first 
sensations  of  most  Secretaries  of  the  Treas- 
ury after  taking  up  the  duties  of  the  office. 
Even  if  the  Secretary  had  been  active  in 
pubHc  Hfe,  and  possessed  passing  famiHarity 
with  the  great  Department,  he  would  scarcely 
have  clearly  comprehended  its  scope,  but  if 
he  were  a  man  coming  from  an  active  busi- 
ness career,  without  opportunity  for  inti- 
mate acquaintance  with  the  Treasury,  the 
first  few  weeks  of  his  official  life,  it  is  likely, 
were  marked  by  daily  discoveries  of  new  and 
entirely  unanticipated  functions. 

The  bureaus  which  are  bound  together  in 
the  Treasury  Department  are,  by  all  odds, 
the  most  diverse,  and  at  the  first  casual 
glance  it  would  seem  the  most  unrelated 
that  are  to  be  found  under  the  jurisdiction 
of  any  of  the  cabinet  officers.  The  public 
thinks  of  the  Treasury  Department  as  the 

^  Since  the  above  was  written  many  of  the  functions  of 
the  Treasury  Department  have  been  assumed  by  the  De- 
partment of  Commerce  and  Labor. 
34  529 


Business    and    Education 

fiscal  division  of  the  Government's  executive 
system.  It  is  a  fact,  however,  that  for  a  good 
many  years  probably  not  less  than  two-thirds 
of  the  time  of  the  Finance  Minister  has  been 
devoted  to  problems  bearing  little  or  no  rela- 
tion to  the  strictly  fiscal  business  of  the  Gov- 
ernment. The  organization  of  a  Department 
of  Commerce,  drawing  as  it  will  its  prin- 
cipal bureaus  from  the  Treasury  Department, 
will  bring  needed  relief  to  a  cabinet  officer 
who  has  quite  enough  to  occupy  his  attention 
in  the  administration  of  affairs  closely  related 
to  the  Government's  financial  business. 

The  responsibility  for  raising  the  reve- 
nues and  for  their  disbursement,  now  that 
the  totals  have  come  to  aggregate  more  than 
one  thousand  million  dollars,  would  seem 
to  be  quite  enough  to  lay  upon  the  shoulders 
of  any  man,  particularly  if  he  must  take  up 
those  duties  without  thorough  familiarity 
with  their  details,  as  does  each  new  secre- 
tary. But  in  addition  to  that  duty,  there  is 
the  further  responsibility  for  the  solution  of 
the  problems  of  an  intricate  and  diverse  cur- 
rency system.  The  Secretary,  too,  occupies 
indirectly,  through  the  Comptroller  of  the 
Currency,  a  supervisory  relation  to  the  whole 
national  banking  organization  of  the  coun- 
try. He  is  the  indirect  custodian  of  $800,- 
000,000  of  gold  and  silver  coin,  stored  in  the 
Treasury  vaults,  against  gold  and  silver  cer- 
530 


The    Treasury 

tificates  in  circulation  representing  that 
coin,  and,  through  his  subordinate,  the 
Treasurer  of  the  United  States,  he  shares 
the  responsibiHty  for  the  care  of  more  than 
two  hundred  milHon  dollars,  representing 
the  cash  balance  which  the  Government  car- 
ries. All  the  Mint  and  Assay  officers  are, 
through  the  Director  of  the  Mint,  under  his 
control.  He  directs  the  operations  of  a  great 
factory  employing  3000  operatives  in  the 
printing  of  money  and  Government  secur- 
ities, and  he  must  there  meet  the  same  prob- 
lems of  organized  labor  that  other  great 
employers  have  to  meet.  He  is  responsible 
for  the  collection  of  commercial  statistics, 
and  is  fortunate  in  finding  a  bureau  for  that 
purpose  which  has  a  record  for  the  best 
statistical  work  done  by  any  of  the  great 
Governments.  He  is  at  the  head  of  the 
greatest  auditing  offices  in  the  world,  where 
every  dollar  of  income  and  every  item  of 
expenditure  is  checked  over  with  minute  ex- 
actness, so  that  at  the  end  of  the  year  it  is 
safe  for  him  to  say  that  the  whole  billion 
dollars,  the  total  on  both  sides  of  the  ledger, 
has  been  collected  and  disbursed  with  abso- 
lute fidelity  and  legality  and  without  error. 

All  these  functions  are  naturally  related 

to  the  management  of  the  fiscal  affairs  of 

the  Government,  but  there  are  many  other 

bureaus  that  do  not  apparently  bear  such 

531 


Business    and    Education 

close  relation.  The  Secretary  will  discover 
that  there  are  almost  as  many  vessels  which 
would  fly  his  oflicial  flag  should  he  come  on 
board  as  there  are  ships  of  war  to  fire  salutes 
to  the  Secretary  of  the  Nax^-.  He  has  large 
fleets  engaged  in  light-house  and  coast-sur- 
vey work,  while  the  revenue-cutter  service, 
in  which  are  many  swift  and  modern  vessels, 
does  police  duty  at  every  port.  He  is  the 
final  authority  in  all  oflicial  judgments  relat- 
ing to  the  more  than  five  hundred  thousand 
immigrants  who  land  on  our  shores  annu- 
ally, and  he  is  the  responsible  executive  for 
carrying  out  the  immigration  laws  and  the 
Chinese  Exclusion  Act.  He  is  the  official 
head  of  the  Bureau  of  Public  Health  and 
Marine  Hospital  Service,  which  guards  our 
ports  from  contagious  diseases,  maintains 
quarantine  service  and  stations,  and  a  great 
system  of  hospitals  for  disabled  seamen. 
The  Government's  Secret  Service  Bureau 
reports  directly  to  him,  and  he  watches  day 
by  day  the  unfolding  of  detective  stories 
more  interesting  than  the  dime  novels  of  his 
boyhood  days,  and  there  accumulate  in  his 
files  packages  of  reports,  tied  with  red  tape, 
more  thrilling  than  the  choicest  example  of 
yellow-covered  literature.  Not  only  is  the 
Secret  Service  Bureau  devoted  to  the  detec- 
tion of  counterfeiting,  but  its  services  are 
called  into  play  in  connection  with  any  se- 

532 


The    Treasury 

cret-service  work  which  the  other  Depart- 
ments may  wish  to  have  done.  The  Bureau 
of  Standards,  to  which  all  questions  of 
weights  and  measures  may  be  finally  re- 
ferred, is  under  his  direction.  No  steam- 
ship may  sail  in  American  waters,  nor  leave 
an  American  port,  the  boiler  of  which  does 
not  bear  the  stamp  of  official  inspection  by 
one  of  his  subordinates.  He  is  the  respon- 
sible head  of  a  Life  Saving  Service,  with 
272  stations  and  a  cordon  of  men  patrolling 
10,000  miles  of  coast ;  of  a  Light-house  sys- 
tem, marking  the  course  of  mariners  with  a 
chain  of  lights  from  Maine  away  around  to 
Alaska;  of  a  Coast  Survey,  which  has  for 
its  business  not  only  the  charting  of  navi- 
gable waters,  but  the  scientific  investigation 
of  the  earth's  curvature;  of  the  Architect's 
Office,  which  has  already  constructed  and 
has  the  care  of  400  public  buildings,  most 
of  them  architecturally  bad,  and  which  is  at 
the  moment  engaged  in  planning  and  build- 
ing 149  others,  many  of  which,  happily,  are 
showing  great  architectural  improvement. 

All  these  duties  are  in  addition  to  the 
fundamental  one  of  collecting  the  public 
revenues,  a  work  requiring  the  maintenance 
of  a  corps  of  6300  officials  at  168  ports  of 
entry,  and  of  a  body  of  internal  revenue  em- 
ployees, whose  eyes  are  literally  upon  every 
foot  of  the  country's  territory. 

533 


Busmess    and    Education 

By  no  means  the  least  of  the  manifold 
duties  of  this  official  are  those  which  are 
connected  with  the  administration  of  the 
civil  service,  for  his  complete  corps  num- 
bers 26,000  subordinates.  There  must  be 
endless  appointments,  promotions,  and 
changes,  and  in  regard  to  them  all  the  Sec- 
retary of  the  Treasury  is  the  final  authority. 

The  mere  enumeration  of  such  a  list  of 
responsibilities  carries  with  it  the  conviction 
that  the  Treasury  of  the  United  States  must 
be  a  wonderfully  well  organized  machine, 
else  it  would  be  impossible  for  any  man  to 
step  into  the  responsibilities  of  its  direction 
without  the  change  being  seriously  felt  by 
the  entire  Treasury  organization  and  the 
whole  country.  The  Treasury  Department 
is  a  wonderfully  well  organized  commercial 
machine.  Taking  it  all  in  all,  I  believe  there 
is  no  organization  in  the  commercial  life  of 
this  country,  look  where  you  will,  that  is  its 
superior ;  in  many  respects  one  will  not  find 
its  equal. 

We  are  apt  to  have  none  too  good  an 
idea  of  our  Government  administration,  and 
sometimes,  with  scant  knowledge  of  facts 
and  conditions,  condemn  the  executive 
branches  of  the  Government.  Naturally  the 
Treasury- has  come  in  for  its  full  share  of 
criticism,  for  it  touches  every  citizen  in  the 
tender  spot  of  his  pocket-book.     For  my 

534 


The    Treasury 

own  part,  however,  every  day  of  greater 
familiarity  with  the  organization  was  a  day 
of  growing  admiration  for  it  and  of  increas- 
ing pride  that  the  multitude  of  affairs  en- 
trusted to  the  head  of  this  Department  are  ad- 
ministered so  intelligently,  so  promptly,  and 
above  all  with  such  absolute  integrity  and  en- 
tire devotion  to  the  Government's  interests. 

Not  only  does  the  Treasury  Department 
handle,  in  the  ordinary  income  and  expen- 
ditures, cash  transactions  aggregating  more 
than  a  billion  dollars  annually,  but  it  is  re- 
sponsible for  the  custodianship  and  the  re- 
newal of  currency,  the  printing  of  paper 
money,  the  coinage  of  specie,  and  the  hand- 
ling of  public  securities,  and  the  figures  on 
both  sides  of  the  ledger  representing  the  total 
of  all  these  transactions  reach  the  incompre- 
hensible aggregate  of  three  and  a  half 
billions. 

Such  great  sums  are  handled  year  after 
year  with  absolute  integrity,  with  books  that 
balance  to  a  penny,  with  cash  drawers  that 
are  never  short,  with  a  trust  not  betrayed. 
Whatever  opinion  home-coming  European 
travellers  may  have  of  Treasury  methods, 
after  more  or  less  successful  attempts  to 
avoid  customs  regulations,  they  must,  on  the 
whole,  give  respect  to  an  organization  which 
accepts  a  responsibility  for  annual  financial 
transactions  aggregating  $3,500,000,000,  and 

535 


Business    and    Education 

has  discharged  that  responsibiHty  year  after 
year,  under  one  poHtical  administration  after 
another,  through  the  vicissitudes  of  cabinet 
changes,  and  presents  a  clean  record  having 
on  it  no  important  blot  of  a  betrayal  of  a 
trust. 

A  new  Secretary  of  the  Treasury  ap- 
proaching the  responsibilities  and  duties  of 
the  great  position  with  an  appreciation  of 
their  importance  must,  in  years  past,  have 
been  greatly  surprised  to  find  how  little  time 
apparently  he  could  devote  to  the  consider- 
ation of  great  national  questions,  and  how 
much  he  must  give  to  the  small  routine  de- 
tails of  the  administration  of  the  civil  ser- 
vice. The  26,000  employees  under  the 
direction  of  the  Secretary  of  the  Treasury 
make  the  Treasury  Department  only  second 
to  the  Post-Office  in  point  of  numbers. 
When  the  civil-service  blanket  was  only 
partly  drawn  over  these  places,  the  time 
which  the  head  of  the  Department  was 
forced  to  give  to  the  discussion  of  appoint- 
ments, matters  in  most  part  of  minor  con- 
sequence so  far  as  the  efficiency  of  admin- 
istration was  concerned,  was  something  that 
must  have  discouraged  more  than  one  sec- 
retary. While  such  appointments  may  have 
been  of  minor  consequence  in  the  actual  ad- 
ministration of  the  Department,  they  were 
of  great  importance  if  regard  was  to  be  had 
536 


The    Treasiiry 

for  maintaining  cordial  relations  with  the 
legislative  branch  of  the  Government. 

Washington  wishes  to  see  evidence  of 
democracy  about  the  Departments.  Neither 
Senator  nor  Congressman  is  satisfied  to  cool 
his  heels  in  an  anteroom  for  any  length  of 
time,  nor  are  political  leaders  who  come  to 
the  Capitol  on  a  mission  likely  to  be  pleased 
if  the  Secretary's  engagements  are  such  that 
an  appointment  cannot  be  made  without  no- 
tice or  delay.  So  it  came  about  that  a  busi- 
ness day  in  the  Secretary's  office  was,  in 
times  past,  almost  wholly  given  up,  during 
the  periods  in  which  Congress  was  in  ses- 
sion, to  the  reception  of  visitors,  and  most 
of  these  visitors  came  to  discuss  matters  of 
small  consequence  to  the  administration  of 
the  Department.  The  Secretary  of  this 
great  Department  must  give  heed  to  innu- 
merable trifles  such  as  would  never  reach  the 
head  of  even  a  comparatively  small  business 
organization.  Requests  come  from  people  of 
importance,  and  they  must  be  taken  up  with 
the  care  which  the  position  of  such  persons 
demands  rather  than  with  any  thought  of 
their  importance  in  relation  to  the  adminis- 
tration of  departmental  affairs. 

There  is  vast  improvement  in  the  Treas- 
ury Department  in  this  respect  compared 
with  former  conditions.  The  Secretary  now 
has  power  to  make  but  few  appointments 

537 


Business    and    Education 

outside  the  classified  service,  and  by  recent 
executive  order  he  may  not  consider  outside 
recommendations  in  regard  to  promotions 
in  the  classified  service. 

Early  in  the  administration  of  Secretary 
Gage  it  was  recognized  by  the  Secretary 
that,  if  he  was  to  give  consideration  to  the 
unusual  number  of  important  public  ques- 
tions which  were  pressing,  he  must  be  re- 
lieved of  much  of  the  detail  of  the  admin- 
istration of  the  civil  service ;  so  he  delegated 
to  a  committee,  consisting  of  an  Assistant 
Secretary,  the  Chief  Clerk,  and  the  Appoint- 
ment Clerk,  consideration  of  all  questions 
of  civil-service  administration  affecting  the 
employees  in  Washington.  This  plan  con- 
tinues in  force.  Political  considerations  have 
always  been  absolutely  excluded  from  the 
deliberations  of  this  committee.  I  can  speak 
for  that  positively,  and  I  mean  to  say  that 
such  a  statement  is  literally  true.  The  com- 
mittee has  considered  many  thousands  of 
promotions  and  changes  in  the  classified  ser- 
vice, and  there  has  been  no  more  discussion 
of  politics  than  would  be  found  in  the  con- 
sideration of  promotions  in  a  great  banking 
or  insurance  institution.  The  recommenda- 
tions of  heads  of  bureaus,  the  length  and 
character  of  service,  the  regularity  of  at- 
tendance, and  the  results  of  examinations 
which   are   made   to   cover   both    academic 

538 


The    Treasury 

and  practical  qualifications,  are  the  factors 
taken  into  consideration.  So  far  is  political 
influence  eliminated,  indeed  so  far  as  pro- 
motions governed  strictly  by  merit  may  be 
considered  the  goal  in  an  ideal  civil-service 
administration,  I  believe  the  conduct  of  the 
civil  service  in  the  Treasury  Department  is 
to-day  practically  all  that  could  be  asked. 

There  are  many  difficult  problems  in  the 
civil-service  administration,  and  one  of  the 
hardest  of  solution  is  what  to  do  with  su- 
perannuated clerks.  Congress  is  distinctly 
opposed  to  anything  like  a  civil  pension ;  but, 
on  the  other  hand.  Congressmen  and  Sen- 
ators will  individually  take  up  the  cudgels 
most  vigorously  in  behalf  of  any  clerk  who 
after  years  of  satisfactory  service  and  regu- 
lar promotions  may  be  reduced  because  of 
declining  efficiency.  The  result  is  that  not 
infrequently  young  men  on  small  salaries 
are  doing  much  better  work,  and  certainly 
far  more  in  quantity,  than  are  older  clerks 
drawing  higher  pay.  The  situation  is  such 
at  the  present  time  that  the  most  serious 
obstacles  lie  in  the  way  of  a  strictly  merit 
system. 

An  attempt  was  made  a  few  years  ago  to 
organize  in  the  Treasury  Department  what 
was  euphoniously  called  an  ''  Honor  Roll," 
and  to  reduce  to  the  nine-hundred-dollar- 
grade  clerks  who  had  passed  seventy  years 
539 


Business    and    Education 

of  age.  Such  clerks  were  to  be  placed  on 
this  "  Honor  Roll,"  which  was  to  be,  in 
some  respects,  a  pension  roll,  although  all 
such  clerks  were  expected  to  be  at  their  desks 
regularly.  Congress  frowned  upon  the  plan, 
and  it  has  never  been  put  into  complete  oper- 
ation. Something  of  the  sort  will  be  abso- 
lutely necessary,  however,  when  the  full 
effect  of  the  protection  of  the  present  civil- 
service  rules  becomes  manifest  in  a  con- 
stantly increasing  ratio  of  old  employees. 

Any  one  who  has  had  experience  in  the 
administration  of  civil  service  must  have 
come  to  appreciate  in  the  highest  degree 
the  protection  and  relief  which  the  civil- 
service  rules  give  to  those  charged  with  the 
responsibility  for  appointments  and  promo- 
tions; but  there  are  plainly  two  sides  to 
civil-service  reform.  The  fetich  which  the 
civil-service  reformer  worships,  in  its  prac- 
tical application,  comes  very  far  from  pro- 
viding a  system  which  will  build  up  the 
best  sort  of  a  working  staff.  That  will  be 
more  and  more  plainly  evidenced  as  the 
result  of  the  present  complete  classification 
of  the  service  works  out.  I  shall  be  surprised 
if  there  are  not  marked  modifications  which 
will  give  to  the  head  of  the  Department, 
always  after  satisfactory  academic  tests  have 
been  applied,  far  greater  freedom  of  selec- 
tion and  appointment  than  exists  at  present. 
540 


The    Treasury 

The  practical  operation  of  civil-service 
rules  results  in  taking  clerks  into  the  service 
at  only  the  lowest  grades,  usually  the  grades 
paying  $660  or  $720  a  year.  It  is  true  the 
rules  permit  the  appointment  of  persons  to 
the  higher  positions ;  but,  as  a  practical  mat- 
ter, certifications  for  new  appointments  are 
almost  always  asked  for  to  fill  only  the  lower 
grades,  while  vacancies  in  the  higher  grades 
are  filled  by  the  promotion  of  those  em- 
ployees who  are  personally  known  to  the 
heads  of  the  bureaus.  The  result  is  that  the 
whole  service  is  being  fed  from  a  class  of 
people  willing  to  accept  these  small  salaries, 
whose  only  known  qualifications  are  very 
moderate  academic  achievements.  The 
people  taking  these  examinations  seem  to  be 
largely  those  who  have  been  unsuccessful  in 
satisfactorily  locating  themselves  in  the  busi- 
ness world.  They  have  some  education,  to 
be  sure,  but  in  a  great  many  cases  they  lack 
those  qualities  which  make  for  commercial 
success.  They  have  drifted  into  dissatisfac- 
tion with  commercial  conditions,  and  are 
glad  to  seek  a  harbor  in  a  routine  Govern- 
ment clerkship.  Rarely  is  there  found 
among  the  class  successfully  passing  these 
examinations  the  sort  of  material  which  will 
develop  good  executive  ability.  Executive 
ability  is  something  that  is  difificult  to  demon- 
strate through  the  medium  of  a  competitive 
541 


Business    and    Education 

academic  examination.  The  Civil  Service 
Commission  has  found  no  way  to  measure 
the  personal  equation,  and  the  personal  equa- 
tion counts  for  much  more  than  does  the 
mere  fact  of  certain  moderate  academic 
training. 

In  the  last  few  years  there  have  been  in 
the  Treasury  Department  two  unusual  op- 
portunities to  make  comparison  of  the  quali- 
fications of  clerks  appointed  outside  of  civil- 
service  regulations  with  those  appointed  in 
the  regular  way.  After  the  breaking  out  of 
the  Spanish  War  work  in  the  auditing  bu- 
reaus of  the  Department  increased  so  rapidly 
that  a  large  number  of  emergency  clerkships 
was  created,  and  Congress  specifically  pro- 
vided that  these  should  be  filled  without  ref- 
erence to  civil-service  rules.  In  spite  of  this 
special  exemption,  not  one  of  the  places  was 
filled  without  the  candidate  first  passing  a 
satisfactory  academic  examination  under  the 
direction  of  the  Treasury  Department  offi- 
cials. Those  charged  with  the  appointments, 
however,  had  perfect  freedom  to  weigh  the 
personal  equation,  in  the  language  of  the 
day  "  to  size  up  the  man,"  and,  while  aca- 
demic qualifications  were  insisted  upon, 
personal  characteristics  were  given  much 
weight.  I  believe  there  is  no  one  intimately 
familiar  with  the  Treasury  Department  who 
will  deny  that  the  clerks  so  appointed  are, 
542 


The    Treasury 

as  a  body,  distinctly  superior  to  those  drawn 
through  the  regular  channels  of  the  civil- 
service  commission. 

The  other  incident  was  the  execution  of 
the  great  detail  connected  with  the  popular 
issue  of  $200,000,000  of  Spanish  War  Loan 
bonds.  The  bonds  were  subscribed  for  by 
325,000  investors.  The  volume  of  the  work 
compelled  the  Department  to  employ  a  spe- 
cial corps  of  600  clerks,  all  of  whom  were 
engaged  without  reference  to  civil-service 
regulations.  There  is  no  question  as  to  the 
general  superiority  of  the  clerks  so  appointed 
when  compared  with  the  average  regular 
clerks  working  beside  them.  They  may  have 
lacked  some  of  the  experience  of  the  older 
employees,  but  their  youth  and  adaptability 
made  them  far  quicker  to  grasp  the  condi- 
tions of  a  new  problem,  more  dexterous  in 
the  execution  of  the  work,  and  distinctly 
more  satisfactory  from  almost  every  point 
of  view. 

Something  less  than  ideally  efficient  ad- 
ministration may  well  be  granted,  however, 
in  order  that  the  head  of  the  Department 
may  have  some  relief  from  Congressional 
pressure  in  regard  to  minor  appointments. 
That  has  been  accomplished  and  the  country 
is  unquestionably  the  gainer  to  a  great  de- 
gree, because  the  Secretary  had  been  given 
time  for  the  consideration  of  those  questions 
543 


Business    and    Education 

which  are  of  vastly  more  importance  than 
are  the  routine  details  of  the  administration 
of  the  personnel. 

In  this  connection  a  word  in  regard  to 
political  pressure  may  be  of  interest.  A 
great  deal  is  heard  about  the  demands  of 
the  politicians  for  places  —  a  great  deal 
more  is  heard  of  such  demands  in  the  ad- 
dresses of  civil-service  reformers  than  is 
heard  in  the  office  of  the  Secretary.  It  may 
be  a  surprising  statement,  but  it  is  an  actual 
fact,  that,  in  the  requests  for  appointments, 
the  claim  for  political  recognition  is  a  com- 
paratively rare  one.  It  is  not  politics,  but 
sympathy  and  charity,  that  moves  the  aver- 
age Congressman  to  visit  the  Departments 
and  plead  for  places.  In  nine  cases  out  of 
ten,  their  requests  may  be  debited  to  pure 
kindheartedness  rather  than  to  political 
machinations. 

Most  of  the  men  who  have  been  cartooned 
into  the  public  mind  as  typical  party  spoils- 
men are,  as  a  matter  of  fact,  modest  in  their 
requests  and  alive  to  the  need  for  good  ad- 
ministration of  the  service.  As  a  rule,  the 
most  imperious  requests  come  from  newly 
elected  Congressmen  representing  unheard- 
of  districts,  who  have  not  yet  adjusted  them- 
selves to  the  situation,  and  who  believe  that 
the  rights  and  perquisites  of  a  member  of 
Congress  have  little  limit.  The  best  known 
544 


The    Treasury 

of  the  great  political  leaders  are  not  likely 
to  make  requests  that  ought  not  to  be 
granted,  and  are  generally  quick  to  appre- 
ciate good  reasons,  if  any  exist,  why  they 
cannot  have  what  they  ask  for.  It  is  an 
interesting  fact  that  some  of  the  most  incon- 
siderate demands  for  promotions  in  classi- 
fied places  come  from  members  of  the  Senate 
and  House  who  publicly  pose  as  leaders 
of  the  civil-service  reform  movement,  while 
the  most  prominent  of  the  political  leaders 
can  almost  always  be  counted  upon  to  be 
reasonable  in  their  demands  and  to  accept 
cheerfully  a  situation  which  prevents  their 
wishes  being  met. 

A  notable  difference  between  the  position 
of  the  Secretary  of  the  Treasury  and  that  of 
the  head  of  a  great  business  organization  is 
the  time  which  the  Secretary  must  devote 
to  the  discussion  of  public  questions  with 
newspaper  representatives.  No  small  part 
of  his  success  will  depend  upon  his  adapta- 
bility to  that  new  condition,  for  the  view 
which  most  of  the  people  of  the  country  will 
form  of  his  administration  will  naturally  be 
much  colored  by  the  attitude  of  the  news- 
paper correspondents  through  whom  the 
public  is  informed  regarding  official  matters. 

Newspaper  conditions  in  Washington  are 
unlike  those  in  other  cities.  There  are  in- 
numerable representatives  of  papers,  cover- 
35  545 


Business    and    Education 

ing  the  whole  range  of  the  country,  each 
one  of  whom  serves  a  constituency  of  great 
importance.  As  a  body,  the  newspaper  cor- 
respondents of  Washington  are  incompar- 
ably superior  to  the  average  newspaper  rep- 
resentatives in  other  cities.  Many  of  them 
have  been  intelligent  observers  of  public 
affairs  for  a  generation,  and  have  been  the 
confidants  and  advisers  of  many  Cabinet 
officers.  There  is  hardly  an  important  news- 
paper man  in  Washington  who  is  not  at  times 
the  trusted  custodian  of  state  secrets,  and 
the  relation  of  these  men  to  public  affairs  is 
entirely  different  from  the  relation  of  the 
average  reporter  in  other  cities  to  the  busi- 
ness questions  of  local  interest.  It  is  im- 
portant that  the  Secretary  of  the  Treasury 
recognize  this,  for  the  Treasury  Department 
is  one  of  the  chief  sources  of  news  at  the 
Capital,  and  that  he  should  learn  to  meet 
fairly  and  frankly  the  newspaper  correspon- 
dents. This  requires  much  time,  much  tact, 
and  a  discrimination  in  determining  those 
who  can  be  fully  trusted  and  kept  confiden- 
tially informed  of  the  progress  of  affairs, 
and  those  who  must  be  talked  to  with 
guarded  politeness. 

The  sacrifice  of  time  is  by  no  means  with- 
out its  recompense.     Many  a  cabinet  officer 
has   received   quite   as   good   counsel    from 
conservative  and  experienced  newspaper  cor- 
546 


The    Treasury 

respondents  as  he  could  get  from  members 
of  Senate  or  House.  This  confidential  rela- 
tion with  newspaper  representatives  is 
unique,  and  unless  a  Secretary  of  the  Treas- 
ury has  been  trained  in  the  official  atmos- 
phere of  Washington,  it  is  likely  to  take 
him  some  time  to  recognize  it  and  adjust 
himself  to  the  condition. 

In  a  most  important  particular  the  Treas- 
ury Department  differs  from  the  Finance 
Ministries  of  other  countries.  Elsewhere  the 
Finance  Minister  occupies  an  authoritative 
relation  to  legislation  affecting  income  and 
expenditure.  With  us,  the  Government  has 
always  gone  on  with  the  most  happy-go- 
lucky  lack  of  co-ordination  between  legis- 
lation affecting  income  and  legislation  affect- 
ing expenditure.  The  Finance  Ministers 
of  other  countries  draw  up  a  budget,  which 
forms  the  basis  of  Parliamentary  legis- 
lation in  financial  matters.  They  make 
careful  estimate  of  probable  Government  in- 
come and  of  the  demands  for  the  executive 
administration,  and  Parliament,  as  an  almost 
pro  forma  matter,  passes  legislation  affecting 
taxation  which  will  conform  to  the  proposals 
in  the  budget,  and  limits  appropriations 
within  lines  which  the  budget  may  prescribe. 

With  us,  however,  the  Secretary  of  the 
Treasury  is  little  more  than  an  agent  who, 
without  comment,  transmits  to  Congress 
547 


Business    and    Education 

from  the  heads  of  the  various  Departments 
their  evStimates  regarding  appropriations. 
Congress,  in  turn,  does  not  pay  close  heed 
to  these  estimates,  frequently  declining  to 
make  appropriations  asked  for,  and  not  in- 
frequently making  appropriations  which  the 
executive  head  of  the  Department  has  de- 
clared are  not  needed. 

With  us  there  is  little  flexibility  on  the 
income  side  of  the  great  public  ledger.  The 
Secretary  of  the  Treasury  may  make  gen- 
eral recommendations  regarding  the  neces- 
sities for  greater  income  or  the  opportunity 
for  decreasing  taxation,  but  Congress  does 
not  look  to  the  head  of  the  Treasury  Depart- 
ment with  much  solicitude  for  advice  regard- 
ing tax  legislation  or  suggestions  concerning 
conservative  limits  of  appropriations.  The 
sources  of  our  Government  income  are  so 
intimately  bound  up  with  the  economic 
theory  of  protection  that  we  are  likely  to 
formulate  our  tax  laws  with  little  or  no  re- 
gard to  the  amount  of  income  they  will  pro- 
duce, and  to  make  appropriations  on  as 
liberal  a  scale  as  the  income  will  permit,  and 
the  Finance  Minister  has  little  if  any  re- 
sponsibility either  for  a  cash  balance  or  a 
Treasury  deficit. 

Congress  is  not  disposed,  either,  to  give 
very  much  heed  to  Departmental  recommen- 
dations regarding  expenditures. 
548 


The    Treasury 

For  many  years,  for  example,  every  Sec- 
retary of  the  Treasury,  in  each  of  his  annual 
messages  to  Congress,  recommended  that  no 
appropriation  be  made  for  maintaining  cer- 
tain customs  districts  which  have  become 
commercially  obsolete,  and  which  are  main- 
tained apparently  for  no  other  purpose  than 
to  give  the  Senator  or  Congressman  most 
concerned  an  opportunity  to  recommend  a 
presidential  appointment.  There  are  12 
customs  districts,  which  are  officered  at  an 
expense  of  $15,578.14,  where  the  total  in- 
come from  customs  in  a  single  year  was 
only  $275.26,  and  the  cost  of  collection, 
therefore,  reaches  $56.59,  for  each  dollar 
collected.  In  spite  of  repeated  recommen- 
dations that  we  accept  the  changed  condi- 
tions which  have  made  these  old-time  cus- 
toms districts  quite  deserted  by  commerce, 
Congress  insists  year  after  year  that  they 
shall  be  maintained,  that  officers  shall  be 
appointed,  and  the  expenses  of  salaries  and 
office  administration  appropriated. 

One  illustration  is  that  of  a  port  equipped 
with  a  collector  at  a  salary  of  $1800,  and 
separated  from  a  large  city  and  an  active 
customs  district  by  only  a  river  bridged  and 
easily  crossed.  The  total  collections  in  a 
recent  year  at  this  port  were  twenty  cents, 
but  the  United  States  Senator  who  con- 
trolled the  appointment  insisted,  when  a 
549 


Business    and    Education 

vacancy  occurred,  that  a  new  appointment  of 
a  collector  be  made,  and  Congress  refused  to 
act  upon  the  many  recommendations  for 
the  abolition  of  this  and  other  useless  ports. 
A  saving  of  $200,000  a  year  could  easily  be 
made  without  any  sacrifice  of  efficiency  in 
the  customs  service,  but  Congress  hesitates 
to  give  up  the  privilege  of  naming  the  ap- 
pointees who  are  to  receive  in  salaries  this 
$200,000  of  useless  expenditure. 

There  are  other  illustrations  of  what 
seems  to  be  almost  a  spirit  of  perverseness 
on  the  part  of  Congress  in  failures  to  accept 
recommendations  for  reductions  in  expendi- 
tures which  Treasury  officials  have  for  years 
believed  could  well  be  made,  while  on  the 
other  hand  it  is  equally  difficult  sometimes 
to  secure  trifling  appropriations  for  greatly 
needed  requisites.  There  is  an  assay  office 
in  a  large  city  in  the  Aliddle  West,  for  ex- 
ample, where  the  Government  pays  out  five 
dollars  in  salaries  for  every  hundred  dollars 
of  gold  which  is  received,  but  Congress  in- 
sists on  making  unasked  appropriations  for 
its  maintenance.  It  sometimes  seems  as  if 
there  were  settled  antagonism  in  appropria- 
tion committees  toward  the  recommenda- 
tions coming  from  the  heads  of  depart- 
ments. Serious  recommendations  made  after 
thorough  study  of  a  subject  are  not  always 
received  in  a  spirit  of  confidence  by  the  ap- 

550 


The    Treasury 

propriation  committees,  and  the  difficulties 
of  executive  administration  are,  in  conse- 
quence, greatly  increased. 

Sometimes  this  apparent  spirit  of  per- 
verseness  goes  farther  and  actively  puts  ob- 
stacles in  the  way  of  administration.  An 
illustration  of  that  is  found  in  recent  efforts 
to  introduce  improved  methods  into  the 
Bureau  of  Engraving  and  Printing.  The 
Government  printing  of  currency  is  done 
upon  the  same  form  of  old-fashioned  hand- 
press  that  was  used  when  the  first  greenback 
and  the  first  national  bank  note  were  turned 
out.  The  process  is  slow  and  expensive. 
The  growth  of  the  country  created  a  demand 
upon  the  Bureau  which  it  was  almost  impos- 
sible to  keep  pace  with,  and  so  it  was  decided 
to  put  in  power  presses  to  print  the  backs 
of  notes.  An  expenditure  of  $25,000  was 
made,  with  results  so  economical  that  a  sav- 
ing of  the  whole  cost  of  the  machines  was 
effected  in  a  few  months.  Tests  were  made 
by  mixing  hand-printed  and  machine- 
printed  bills  and  submitting  them,  unmarked, 
to  numbers  of  expert  money  counters;  and 
invariably  the  machine-printed  bills  would 
be  selected  as  the  best  examples  of  plate 
printing. 

Labor  organizations  were  opposed  to  this 
introduction  of  power  presses,  however,  and 
when    Congress    convened    brought    active 

551 


Business    and    Education 

pressure  to  bear  at  the  Capital,  with  the 
result  that  riders  were  tacked  upon  the  ap- 
propriation bills  prohibiting  the  expenditure 
of  any  appropriation  for  the  maintenance  of 
power  presses;  and  this  was  done  without 
any  communication  with  the  Secretary  of 
the  Treasury  on  the  part  of  either  Senate  or 
House  committee,  without  any  opportunity 
for  presenting  the  Treasury's  side  of  the 
matter,  and  without  any  effort  to  secure  in- 
formation as  a  basis  for  intelligent  legisla- 
tion except  such  as  was  presented  by  labor 
leaders  who  were  not  even  in  the  employ  of 
the  Government. 

The  Ways  and  Means  Committee  and 
the  Appropriation  Committees  of  Congress 
take  upon  themselves  the  responsibility  for 
adjusting  the  relation  between  income  and 
expenditure.  A  great  tariff  bill  may  be 
framed  with  little  more  than  nominal  ref- 
erence to  the  Treasury  Department,  and 
legislation  formulated  which  may  enor- 
mously affect  one  side  or  the  other  of  the 
Treasury  accounts  without  the  voice  of  the 
Secretary  being  heard  or  his  advice  asked 
for.  Income  is  provided  and  expenditures 
are  appropriated,  without  Congress  being 
advised  by  the  head  of  the  Treasury  as  to 
the  balance  between  the  two  sides  of  the 
budget. 

A  phase  of  Treasury  affairs  emphasized 
552 


The    Treasury 

in  the  public  mind  is  the  relation  of  the 
Treasury  to  the  money  market.  At  certain 
seasons  much  is  to  be  heard  about  the  cries 
of  Wall  Street  for  Treasury  help,  and  of  the 
relief  measures  which  the  Secretary  of  the 
Treasury  may  bring  to  bear  upon  an  un- 
satisfactory banking  position.  An  ideal  fis- 
cal situation  for  the  Government,  President 
Harrison  once  said,  would  be  one  in  which 
the  income  each  day  just  equalled  the  ex- 
penditures. In  such  a  situation  there  would 
be  no  problem  regarding  the  relation  of  the 
Treasury  to  the  money  market.  So  long  as 
we  must  work  with  our  present  Sub-treasury 
system,  however,  founded  as  it  was  in  igno- 
rance and  suspicion  of  proper  banking  func- 
tions, we  must  periodically  face  a  situation 
in  which  the  operations  of  the  Treasury  are 
of  great  import  in  the  general  financial  sit- 
uation. Laws  which  have  been  allowed  to 
stand  unchanged  since  Jackson's  hatred  of 
the  banks  was  crystallized  into  statute,  pre- 
vent the  deposits  of  the  receipts  from  cus- 
toms anywhere  but  in  the  actual  vaults  of 
the  Treasury  or  Sub-treasury.  The  country 
is  in  such  a  position  as  a  great  business  firm 
would  be  whose  receipts  at  times  enormously 
exceeded  its  expenditures,  if  it  should  decide 
to  lock  up  its  daily  income  in  safety  deposit 
vaults,  turning  all  credits  into  cash  and  lock- 
ing up  the  actual  currency  just  at  a  time 

553 


Business    and    Education 

when  there  might  be  a  most  active  demand 
in  the  ordinary  channels  of  trade  for  the 
currency  which  would  thus  be  abstracted. 

Of  course,  it  is  impossible  to  have  such 
an  ideal  situation  as  President  Harrison 
suggested;  so  long  as  the  laws  relating  to 
the  Sub-treasury  system  stand  unchanged  it 
is  useless  to  talk  about  taking  the  Govern- 
ment out  of  the  banking  business.  The  oper- 
ations of  the  Treasury  inevitably  draw  it 
into  the  situation,  and  it  becomes  one  of  the 
great  problems  of  the  Secretary  to  keep,  as 
nearly  as  may  be,  an  unchanging  total  of 
currency  in  the  Treasury  vaults,  and  neither 
withdraw  from  the  circulating  medium  in 
active  use  great  quantities  of  currency  when 
income  is  excessive  nor  suddenly  add  to  the 
currency  in  circulation  when  the  Government 
has  great  payments  to  make  in  excess  of  its 
daily  income.  The  problems  of  that  char- 
acter were  unusually  frequent  and  difficult 
during  Secretary  Gage's  administration. 
The  successful  settlement  of  the  Pacific  Rail- 
road indebtedness  brought  a  payment  of 
$58,000,000  to  the  Treasury  in  December, 
1897,  just  at  a  period  of  most  active  com- 
mercial demand  and  when  the  withdrawal 
of  so  much  currency  would  have  been  dis- 
astrous to  reviving  business.  A  few  months 
later  came  the  sudden  expenditures  result- 
ing   from    the    $50,000,000    appropriation 

554 


The    Treasury 

made  by  Congress  at  the  beginning  of  the 
Spanish  War,  and  soon  after  that  were 
poured  into  the  Treasury  the  proceeds  of 
$200,000,000  of  Spanish  War  Bonds.  Twice 
during  the  administration  issues  of  Govern- 
ment bonds  matured,  and  payment  of  many 
milhons  had  to  be  made  on  that  account. 
This  period  was  the  most  remarkable  since 
the  Civil  War  for  violent  fluctuations  in  the 
Treasury's  balance,  and  it  is  one  of  the  best 
evidences  of  genius  in  the  administration  of 
the  Department  at  that  time  that  the  stock 
of  money  actually  in  the  Treasury  vaults, 
in  spite  of  this  period  of  irregular  income 
and  expenditure,  was  always  kept  at  com- 
paratively the  same  level,  and  Treasury  oper- 
ations were  not  permitted  seriously  to  affect 
the  currency  of  the  country. 

It  is  such  problems  as  these  which  a  Sec- 
retary of  the  Treasury  must  always  find  re- 
curring, so  long  as  our  present  Sub-treasury 
system  is  maintained,  and  the  best  evidence 
of  ability  on  the  part  of  a  Secretary  is  that 
these  sudden  influxes  of  funds  or  exceptional 
expenditures  are  handled  so  that  the  public 
has  no  reason  to  recognize  the  intimate  re- 
lation which  must  exist  under  present  con- 
ditions between  the  Treasury  and  the  bank- 
ing situation. 

With  a  currency  system  which  has  largely 
been  the  growth  of  exigency  rather  than  of 

555 


Business    and    Education 

forethought,  there  is  always  a  desire  for  leg- 
islation which  will  bring  the  country's  cur- 
rency into  line  with  sound  economic  prin- 
ciples. Both  the  country  and  Congress  have 
come  to  look  to  the  head  of  the  Treasury 
Department  as  a  natural  source  for  sugges- 
tions regarding  needed  currency  and  bank- 
ing legislation,  and  one  of  his  most  important 
duties  is  the  preparation  of  that  portion  of 
his  annual  report  to  Congress,  which  con- 
tains recommendations  of  such  character. 
That  has  been  true  particularly  during  those 
recent  years  in  which  fundamental  currency 
discussion  has  been  so  prominent  in  political 
affairs,  and  during  which  there  has  been 
formulated  legislation  which  is  an  important 
part  of  the  groundwork  of  our  financial  sys- 
tem. It  requires  a  wide  range  of  ability 
to  pass  easily  from  the  innumerable  practical 
problems  of  executive  administration  which 
the  Treasury  presents,  to  the  writing  of 
State  papers  given  to  theoretical  and  eco- 
nomic discussion  of  some  of  the  subtleties  of 
finance  and  currency.  The  annual  reports 
of  the  heads  of  the  Treasury  Department 
for  many  years,  however,  show  that  we  have 
been  fortunate  in  having  men  of  such  breadth 
of  ability  that  they  could  do  this  and  do  it 
well. 

Not  only  must  the  Secretary  successfully 
grasp   theoretical   problems   in   finance   and 
556 


The    Treasury 

be  capable  of  building  up  in  his  message  to 
Congress  sound  recommendations  for  finan- 
cial legislation,  but  he  has  to  face  a  much 
more  trying  ordeal  when  he  is  invited  to 
appear  before  either  the  Senate  Finance 
Committee  or  the  House  Committee  on 
Banking  and  Currency  —  a  thing  which  is 
usual  whenever  important  financial  legisla- 
tion is  under  consideration.  It  is  a  com- 
paratively easy  matter,  with  ample  time  and 
good  counsel,  to  evolve  satisfactory  recom- 
mendations for  legislation,  but  it  is  far  more 
dif^cult  to  advocate  those  recommendations 
in  an  inquiry  by  ingenious  and  hostile  mem- 
bers of  a  Congressional  Committee.  Any 
one  who  has  studied  the  proceedings  of 
Senate  or  House  Committees  when  prom- 
inent business  men  have  been  brought  before 
them  to  express  their  views  upon  financial 
legislation  must  have  been  struck  by  the 
lamentable  showing  which  some  of  the  most 
prominent  financiers  may  make  under  a  fire 
of  questions  from  keen-witted  and  experi- 
enced members  of  this  committee.  Men 
who  are  rulers  in  practical  finance  are  fre- 
quently unable  to  hold  their  own  in  any- 
thing like  creditable  shape  in  a  discussion  of 
fundamental  financial  measures  which  it  may 
be  proposed  to  enact  into  law. 

English    Cabinet    Members    must   appear 
in  Parliament  to  answer  interpellations,  but 

557 


Business    and    Education 

notice  of  the  question  is  given  the  day  before 
and  a  member  of  the  Cabinet  has  ample 
time  to  confer  and  to  study  his  answer,  and 
he  may  even  dechne  for  state  reasons  to 
make  any  answer,  if  he  sees  fit.  Our  own 
Finance  Minister  is  put  in  a  much  more  diffi- 
cult position,  however,  when  he  appears  be- 
fore a  Congressional  Committee.  He  knows 
only  the  general  line  that  the  inquiry  will 
take.  If  he  is  called  before  the  Banking  and 
Currency  Committee,  he  faces  seventeen 
members,  of  whom  a  large  minority  are  po- 
litically hostile  and  who  are  thoroughly 
trained  in  the  art  of  asking  difficult  ques- 
tions. His  answers  become  a  part  of  the 
published  records,  and  he  is  placed  in  a  posi- 
tion where,  if  he  is  to  make  a  satisfactory 
showing,  he  must  reply  off-hand  to  any  ques- 
tion that  is  propounded  by  any  member  of 
the  committee.  To  go  through  such  an 
ordeal  with  satisfaction  needs  thorough  un- 
derstanding of  the  subject  and  readiness  of 
comprehension  and  retort. 

The  most  important  bureau  in  the  Treas- 
ury Department  is  the  one  charged  with 
the  duty  of  collecting  the  customs.  Not 
only  must  this  bureau,  in  order  that  there 
shall  be  no  smuggling,  keep  a  watchful  eye 
upon  15,000  miles  of  coast,  a  northern 
frontier  more  than  three  thousand  miles 
long,   and   a   southern  boundary   stretching 

558 


The    Treasury 

the  full  breadth  of  Mexico,  but  it  is  charged 
with  the  administration  of  the  most  intri- 
cate tariff  schedule,  requiring  not  only  fidel- 
ity and  integrity  where  vast  sums  are  con- 
cerned, but  great  expert  knowledge  in  regard 
to  commodities  and  the  keenest  intelligence 
in  the  application  of  that  knowledge.  The 
great  work  of  this  bureau  is,  of  course,  in 
the  collection  of  the  customs  levied  on  regu- 
larly imported  merchandise,  and  that  work 
goes  on  with  little  criticism  and  without 
much  friction.  Another  phase,  the  collection 
of  duties  on  articles  brought  home  by  re- 
turning travellers,  is  comparatively  insig- 
nificant in  point  of  income,  but  to  a  large 
number  of  citizens  it  is  the  one  point  of  con- 
tact which  they  have  with  the  Department, 
and  it  not  infrequently  leaves  them  ready  to 
condemn  and  upbraid.  One  of  the  difficul- 
ties in  this  part  of  the  administration  lies  in 
the  palpable  fact  that  it  is  not  easy  to  obtain 
a  corps  of  inspectors,  when  Congress  limits 
their  salaries  to  four  dollars  a  day,  who  will 
serve  long  hours  at  trying  duties,  always 
maintain  their  equanimity,  and  be  courteous 
in  the  face  of  much  provocation  to  be  other- 
wise, and  always  retain  their  integrity  and 
repel  efforts  to  corrupt  them  made  by  people 
occupying  positions  of  high  standing  and 
respect  in  the  community.  Under  President 
McKinley's  administration  it  was  determined 

559 


Business    and    Education 

to  make  the  enforcement  of  the  law,  as  it 
applied  to  returning  travellers,  much  more 
rigid  than  had  been  the  case,  and  the  stricter 
enforcement  which  has  since  been  in  vogue 
has  led  to  more  criticism  of  the  Treasury, 
probably,  than  has  any  other  phase  of  its 
affairs. 

In  the  minds  of  most  people  a  customs 
law  seems  to  be  quite  unlike  other  laws.  It 
is  a  statute  which  it  is  more  or  less  of  a 
credit  to  evade,  and  methods  of  false  witness 
and  bribery  may  be  brought  to  bear  with- 
out troubling  the  traveller's  conscience.  It 
is  this  peculiarity  of  human  nature  that 
makes  the  task  extremely  difficult.  There 
is  much  complaint  about  the  Treasury  treat- 
ing returning  travellers  as  if  their  word  was 
not  to  be  trusted,  and  submitting  their  bag- 
gage to  search  after  sworn  declaration  has 
been  made.  Brief  experience,  from  the  in- 
side, with  this  part  of  the  Treasury  adminis- 
tration will  convince  one  how  necessary 
such  an  attitude  is.  As  an  illustration  of 
that  statement,  the  case  might  be  cited  of 
fifteen  prominent  citizens  of  New  York  City 
who  went  abroad  two  or  three  years  ago, 
and,  on  their  return,  all  submitted  sworn 
statements  in  regard  to  the  contents  of  their 
trunks.  Twelve  declared  they  had  no  duti- 
able articles,  and  the  remaining  three  paid 
an  aggregate  of  $538.  The  next  year  the 
560 


The    Treasury 

same  fifteen  citizens  made  their  annual 
European  pilgrimage  and,  on  their  return, 
were  met  by  the  stricter  administration  of 
the  same  law.  In  addition  to  their  sworn 
declaration  their  baggage  was  carefully  ex- 
amined, with  a  result  that  they  paid  over 
$34,000  of  duty.  Is  it  small  wonder  that, 
after  endless  experiences,  of  which  the  fore- 
going is  but  an  average  illustration,  a  strict- 
ness of  inspection  should  be  put  in  force 
which  is  galling  to  men  who  have  both  honor 
and  good  memories  and  make  out  correct 
schedules  of  their  purchases  when  they  give 
their  sworn  declaration  tO'  a  customs  in- 
spector ? 

In  the  administration  of  the  customs 
there  have  undoubtedly  been  men  who  were 
not  true  to  their  oath  of  office  and  have 
accepted  bribes.  A  considerable  number  of 
inspectors  have  at  one  time  or  another  been 
summarily  dealt  with  for  such  offence.  In 
the  handling  of  the  vast  sums  of  money 
which  are  a  part  of  the  Treasury's  opera- 
tions, there  have,  in  very  rare  cases,  been 
instances  of  petty  pilfering.  Taken  by  and 
large,  however,  the  Treasury  Department  is 
a  splendid  great  commercial  machine,  admin- 
istered with  an  integrity  reaching  all  the  way 
from  the  head  of  the  Department  through 
the  whole  army  of  its  thousands  of  sub- 
ordinates, an  integrity  of  which  the  country 
36  561 


Business    and    Education 

may  well  be  proud.  Everywhere  in  the  ad- 
ministration the  interests  of  the  Govern- 
ment are  paramount  to  all  else. 

The  good  faith  and  integrity  of  admin- 
istration may  meet  with  assault  from  politi- 
cal pressure;  there  may  be  men  who  seek 
by  bribery  to  influence  political  action ;  there 
may  be  brought  to  bear  all  the  wiles  and  in- 
genious methods  which  great  pecuniary  in- 
terests can  evolve,  but  the  Treasury  with- 
stands such  assaults  and  is  a  clean,  upright, 
honestly  administered  organization,  with  the 
interests  of  the  Government  always  fore- 
most. No  one  can  become  intimately  fa- 
miliar with  its  operation  without  respect  for 
its  integrity.  There  are  men  in  the  organ- 
ization whose  names  never  reach  the  public, 
but  whose  careers  have  been  models  of  effi- 
ciency, intelligence,  and  probity.  Some  of 
those  names  it  is  an  honor  to  mention,  for 
the  men  have,  with  small  compensation, 
given  to  the  Department  years  of  service  of 
a  character  which  has  made  success  com- 
paratively easy  to  a  long  line  of  Secretaries, 
and  always  through  one  administration  after 
another  have  given  devoted  service  to  the 
Department  and  its  changing  head.  Such 
men  are  A.  T.  Huntington,  the  head  of  the 
Loans  and  Currency  Division,  a  man  whose 
sound  judgment  has  been  a  support  to  every 
Secretary  for  a  generation;  W.  F.  Mac- 
562 


The    Treasury 

Lennan,  who,  as  the  head  of  the  Division  of 
Bookkeeping  and  Warrants,  has  rendered 
services  of  such  distinguished  character  that 
Congress  has  attached  extra  compensation 
to  this  position  so  long  as  he  may  hold  it; 
Major  J.  F.  Meline,  who,  as  Assistant  Treas- 
urer of  the  United  States,  has  most  largely 
carried  the  responsibility  for  the  safe  cus- 
tody of  the  vast  sums  of  currency  in  the 
Treasury  vaults,  and  whose  integrity  is  as 
undoubted  as  that  of  any  vault  the  Govern- 
ment possesses ;  C.  N.  McGroarty,  who,  un- 
der a  succession  of  Registers  of  the  Treas- 
ury, has  been  largely  responsible  for  the 
conduct  of  that  important  office  in  a  way 
to  leave  no  doubt  of  the  absolute  accuracy 
of  its  work;  Thomas  E.  Rogers,  who,  al- 
most since  the  organization  of  the  na- 
tional banking  system,  has  been  in  charge 
of  the  Bureau  of  Bank-note  Redemption,  and 
through  whose  hands  have  passed  $2,000,- 
000,000. 

The  list  might  be  much  extended.  There 
are  many  men  in  the  service  whom  it  is  an 
honor  to  know,  men  whose  character,  fidel- 
ity, and  intelligence,  massed  together,  make 
the  great  Treasury  machine  what  it  is  —  a 
Department  of  the  Government  of  which 
the  people  of  the  United  States  should  be 
unreservedly  proud. 

The  University  Press,  Cambridge,  Mass.,  U.  S.  A. 


^      Or     -He'^^ 

*^NIVERSITY  I 


FOURTEEN  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 


This  book  is  due  on  the  last  date  stamped  below,  or 

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